Combinations 



Trusts^ 
.Monopolies 



BxEdwardJjyblan 




Class. 

Book >/V 7 

CopyrightN? 

COPYRIGHT DEPOSIT. 




w 



W 



(Eomtmtatuma 

r A Discussion of the Origin, Development, and 
Treatment of the Modern Indus- 
trial Combination. 

lg E&warfc JL Nolan, Itl. 




Irooimiay Jfcbttaifttuj (Eompattg 

835 Broadiuay, New York 



I LIBRARY of CONG 
Two Copies deceived 

DEC 5 1^04 

Copyright tntry 
CLASS c*- XXc, Noj 

/<* ^jy 

COPY B. 







Copyrighted, 1904, 

BY 

EDWARD J. NOLAN, LL.B* 



All Rights Reserved. 



CONTENTS. 



CHAPTER I. 

Preliminary Observations. 

page 

The present situation 1 

The Elkin's amendment to the interstate commerce 

act ^ 2 

The Bureau of Corporations . 2 

Analysis required 4 

Remedies must come from the people 6 

CHAPTER II. 

The Competitive System. 



Its origin and development 8 

In the commercial world 9 

The introduction of partnerships 12 

The creation of corporations 12 

The evolution of competition in the productive in- 
dustries 13 

Deceits in trade and adulteration of products.... 15 

The beginning of combination 15 



iv Contents. 

PAGE 

Competition defined 16 

Beneficial effects of competition 16 

Equality of opportunity required 17 

Individuality is the life of competition 18 

Competition has long been favored by the law. ... 19 

It has been supported by statutes, etc 19 

Summary 20 



CHAPTER III. 
Objects of Combination. 



Causes which led to the formation of combinations. 22 

Extreme sharpness of competition 22 

Exhaustion of speculative fields of investment.... 22 

The lowering of the rates of interest 23 

The panic of 1893 23 

Advantages of combination enumerated 23 

Salaries paid to officials, etc 25 

Dispensing with the services of traveling salesmen. 26 

Reduction of rent charges 27 

Decrease in the cost of light, heat, and ventilation. 28 

Employment of plants to their full capacity 29 

Saving in freight charges 29 

Economy in the purchase of raw materials 29 

Improved facilities for advertising 31 

Development of foreign markets 31 

Table of exports of manufactures 32 



CHAPTER IV. 
Forms of Organization. 



The working agreement 35 

Agreement for the division of territory 37 

Pools 38 



Contents. v 

PAGE 

Trusts 39 

The great corporation 42 

Securities holding corporations 44 



CHAPTER V. 
Powers and Effects of Monopolies. 



Monopoly denned 46 

History of monopoly 46 

Control of quantity of production 48 

Quality of production 49 

Regulation of price 51 

Monopoly price • 54 

Purpose of industrial combinations 5Q 

Table of prices of leading articles 61 — 82 

Effect of combination upon prices 84 

Influence upon wages 84 

The introduction of new industries 87 

The displacement of labor 89 

Selfishness of combinations 96 

Permanency of the industrial combinations 96 

Change in ownership of combinations 97 

Effects of combinations upon employers 98 

Displacement of employers 99 

Political influence of combinations 104 



CHAPTER VI. 
Growth of Combinations. 



The introduction of the factory system 108 

Tendency towards concentration 108 

Rate of increase in the Dumber of combinations. . . . 114 

List of recently organized combinations 116 

Percentage of products controlled by combinations. . 119 



vi Contents. 

PAGE 

Maximum efficiency 121 

Mass of capital 124 

Disposition of large concerns to combine. . . . 126 

Evils recognized by the people 127 



CHAPTER VII. 
Legislation and Judicial Construction. 



Old English law and decisions 130 

Contracts in restraint of trade 132 

Anti-trust statutes 134 

Extracts from the decisions of the Supreme Court of 

Illinois 134 

Ohio 135 

Pennsylvania 136 

Severity of corporation laws 139 

Liberality of certain states towards corporations... 143 

New Jersey the home of foreign corporations .... 144 

The filing of certificates by foreign corporations.. 148 

Need of revision of corporation laws 151 

The Sherman Anti-Trust Act 152 

Interstate commerce defined 155 

Jurisdiction of the state and federal government 

defined 155 

The act for the suppression of lotteries 159 

Constitutionality of the act considered 160 

Power of Congress to regulate interstate commerce. 168 



CHAPTER VIII. 

Quasi-Public Monopolies. 

Classification of monoplies 177 

Quasi-Public Monopoly defined 180 

Development of the rights of the public 180 



Contents. vii 

PAGE 

Rights of the individual 185 

Perpetual franchises 194 

Control of public services by private corporations. 199 

Private interest the source of evil 209 

Municipal control demanded 210 

Lack of faith in the people 213 

Control of a service distinguished from that of 

property 21? 

The case of Munn \ersus Illinois discussed 218 

The true doctrine as announced by Lord Ellenbor- 

ough 223 



CHAPTER IX. 



Monopolies and the Taeiff. 



Monopoly depends upon its ability to control the 

product 228 

Control of the production of the raw materials. . . 228 

Tariff duties serve to limit the supply. 229 

Difficulties of controlling the world's production . . 230 

Average duty paid upon imports 234 

Table of industrial combinations 236 

Protection afforded to combinations 248 

The purpose of protection 249 

Ability to compete with foreign producers 250 

Exports of American manufactures 251 

Table of exports of manufactured articles 252 

Combinations as exporters 255 

Lower prices to foreign markets 256 

Protection no longer required by combinations .... 260 
Manufacture of surplus products for foreign 

markets . 260 

Profits on foreign sales 264 

Combinations unwilling to surrender protection . . . 268 

Independent producers not protected 269 

Combinations not dependent upon tariff protection. 271 



viii Contents. . 

PAGB 

CHAPTER X. 
Remedies. 



Duty of government to protect the rights of its 

citizens - 273 

Power to remedy every evil always resides in the 

people 274 

Good faith and fair dealing desired 280 

Public supervision of corporations 281 

Powers of Congress discussed. . . . 282 

Proposed amendments to the Constitution 283 

Difficulties of providing for federal supervision.... 286 

State supervision necessary 289 

Objections to state supervision considered 293 

The public invited to investigate corporate se- 
curities 295 

Trade secrets 297 

Publicity necessary for proper enforcement of laws. 300 

Right of the state to inspect corporate affairs. ... 301 

Watering of stocks 305 

Power to raise prices 311 

Limitation of profits 313 

Foreign corporations 334 

Taxation of capital stock 335 

Control of local branches of foreign corporations . . . 338 
Remove tariff from articles produced by combina- 
tions 339 

Taxation 341 

Education 343 

Competition promoted by reinvestment of profits.. 345 

Advantages of small competitors discredited 346 

No hope of natural dissolution of corporations .... 347 

Competition should be fostered 350 

Monopoly of the sources of production restricted.. 351 

Paternalism 352 

Conclusion 353 



Combinations, Trusts & Monopolies 



CHAPTER L 

PRELIMINARY -OBSERVATION'S. 

"Aisr indefinable something is to be done in a way 
nobody knows now and at a time nobody knows 
when. That, as* I understand, is the programme 
against the trusts." The foregoing summary of 
the attitude of the people toward the trusts is said 
to have been made by the late ex-Speaker Thomas 
B. Eeed while in conversation with a leading mem- 
ber of the House on the opening day of the sec- 
ond session of the Fifty-seventh Congress, in De- 
cember, 1902. It fairly expressed the feelings of 
unrest and dissatisfaction and the spirit of de- 
termined but unguided and almost hopeless resist- 
ance to the overwhelming oppressions of the trusts 
which pervaded the rank and file of the people of 
every political party at that time. Nothing has 
since been done to relieve the situation, and con- 
ditions are daily becoming more intensified and 
unbearable, and we have every reason to believe 
that the same statement might be repeated with 



2 Combinations, 

equal truth and fairness at the opening of the 
Fifty-eighth Congress. 

The Statute enacted by the Fifty-seventh Con- 
gress, commonly known as the Elkins Law, is 
merely an amendment to the Interstate Commerce 
Act, and is designed to afford a more effective 
means of enforcing its provisions. That act relates 
only to common carriers, or those engaged in the 
transportation of freight or passengers for hire, 
and the Interstate Commerce Commission has for 
more than sixteen years been attempting, with 
more or less success, to insist upon a strict appli- 
cation of its terms to the affairs of railroad com- 
panies. There is, therefore, but little reason to 
hope for radical improvement from a mere change 
in the method of enforcing the provisions of the 
old law, and as its effects upon combinations en- 
gaged in other lines of trade must necessarily be 
indirect and secondary, it is not likely to afford any 
material relief to the general situation. 

The Bureau of Corporations, established by the 
last Congress in connection with the Department 
of Commerce and Labor, is merely empowered to 
inquire into the affairs of corporations engaged 
in commerce among the states and to collect such 
information as it can concerning them, all of which 
it is required to report to the President of the 
United States for the purpose of enabling him to 
recommend to Congress the enactment of such 
legislation as, in his opinion, the disclosed state of 
facts may seem to require. As now constituted it 
is simply an information bureau for the conven- 
ience of the President, but into what it may ulti- 
mately develop, and what real powers may here- 



Trusts and Monopolies. 3 

after be conferred upon it, is a matter which at 
this time can only be conjectured. The considera- 
tion of the subject, however, will doubtless engage 
a considerable share of the serious attention of the 
Fifty-seventh Congress, and the constitutionality 
of any act which seeks to give to this bureau power 
to interfere with the affairs of any individual or 
corporation whose principal business is not directly 
connected with, or a part of interstate commerce, 
will be certain to present an interesting subject for 
investigation by the Supreme Court of the United 
States, upon which it is safe to predict that more 
than one learned opinion will be written. It is 
clear, therefore, that the legislation on this sub- 
ject thus far enacted by Congress is merely in- 
tended as preparatory to something more direct 
and effective which is expected to follow. The 
establishment of this bureau for the purpose of 
securing information relative to the management 
and operations of corporations is an official ac- 
knowledgment that there is believed to be some- 
thing radically wrong in the present adjustment of 
our industrial system, and that the facts pertain- 
ing to it, and the remedies required to preserve it 
from the danger of self-destruction, have not yet 
been made to appear sufficiently clear to the public. 
The people, then, knowing the unavoidable, but 
exasperating delays which almost invariably attend 
the inauguration of any new scheme of legislation, 
should bestir themselves to determine what meas- 
ure will best serve to promote the general welfare 
of the whole country, and to insist upon their im- 
mediate adoption and enactment by those to whom 
the task of framing legislation has been entrusted. 



4 Combinations, 

.< 
It is believed that the general confusion whicK 
still obscures the public understanding of the in- 
dustrial situation, and the hesitation and indecision 
which has thus far marked the course of legisla- 
tion concerning it, arise chiefly from a failure to 
properly analyze the subject and to comprehend 
clearly the natural functions and effects of the sim- 
ple elements of which it is composed. 

The modern printing press into which paper is 
fed from a roll and which returns it printed, cut 
into sheets and folded ready for distribution in the 
familiar form of newspapers; the commutating 
machine which by merely operating a few keys, 
as on a typewriter, performs the most difficult 
mathematical operations with mechanical ease and 
exactness; and the watch which accurately meas- 
ures time to a fraction of a second, appear wonder- 
ful to those who are not familiar with their con- 
struction, but when analyzed they are found to con- 
sist of a combination of the most elementary me- 
chanical powers, the uses of which are well known 
to every schoolboy. Each of these machines is 
found to be simply a skillful adjustment of wheels 
and levers, the working of any one of which would 
attract no interest whatever, but when suitably 
connected their effects may sometimes be truly 
amazing. The phonograph seems to be a most 
marvellous contrivance to those who think only of 
its power to reproduce the human voice, but when 
examined closely it is discovered to be merely an 
application of the simplest principles which govern 
the production and transmission of sound. It is 
precisely the same with the contemplation of 
economic conditions. If we see only the complex: 



Trusts and Monopolies. 5 

exterior presented by a social movement and at- 
tempt to judge it by the results it has achieved, 
it will frequently be found to present difficulties 
go grave as to seem to baffle human understanding. 
But if we inquire what means have been employed 
to attain these ends, it will be found that this great 
social machine is nothing more than the develop- 
ment of simple relations with which we have long 
been familiar, and the recognition of them will 
enable us much more easily to master the intri- 
cate relations arising from their combined opera- 
tion. It is the hope of being of some assistance 
in removing the mystery which still envelopes 
so many of the features of this subject, and thus 
clearing the way to a just and enlightened solu- 
tion of the perplexing problems involved in it, 
that has led to the writing of these pages. 

The dual form of our scheme of government 
under which the regulation of the varied interests 
of society is attempted to be fairly apportioned be- 
tween the state and federal authorities, makes it 
exceedingly difficult at times to determine whether 
the jurisdiction over a given subject is properly 
vested in the one or the other, but the importance 
of deciding the questions correctly and preventing 
any usurpation of powers by the one or abandon- 
ment of them by the other, and of insisting upon 
a strict adherence to that adjustment of rights and 
obligations which was prescribed by the framers 
of our national constitution, cannot be over-esti- 
mated, for upon the preservation of this funda- 
mental principle of our organic law depends the 
stability and permanency of our republic. The 
duty of safeguarding it has been entrusted to the 



6 Combinations, 

whole people, and from them must come the brain 
and the muscle, the wisdom and the courage, which 
are necessary to guide the nation through every 
danger and to protect it from all harm. Many 
nice questions have arisen since the adoption of 
the Constitution of the United States in which the 
powers of Congress and of the state governments 
have been considered, and some of the greatest 
minds that our country has produced have devoted 
their best efforts to the discussion and settlement 
of the constitutionality of measures in which the 
jurisdiction of the state and national govern- 
ments appeared to be brought into conflict, but no 
subject that has yet been proposed has promised 
material for a more interesting and profitable in- 
vestigation, or important judicial construction 
than the one now before us. The responsibility of 
determining upon the proper means of redressing 
wrongs or of remedying social evils, rests upon the 
people, and until they have done so, they cannot 
expect their representatives to enact satisfactory 
laws. Legislators, at their best, merely reflect the 
will of the people, and until that will is made 
known their position is substantially that of agents 
awaiting instructions, or at most they may indulge 
in the passage of acts which serve but for little 
more than temporizing experiments. No laws, 
however wise or good they may be, can hope to be 
effective under a republican form of government 
unless they are supported by the common people. 
It behooves us, therefore, to study the conditions 
which confront us that we may be prepared to in- 
telligently discharge the duties of American citi- 
zenship, and prove faithful to the trust imposed in 



Trusts and Monopolies. 7 

us by the Fathers of our Country. To that end 
we shall now proceed to examine some of the de- 
tails of the most absorbing topic of the day, the 
one subject with which every one is supposed to be 
familiar, but of which very few are prepared to 
give a satisfactory account. 



8 Combinations, 



CHAPTER II. 

THE COMPETITIVE SYSTEM. 

Iisr the early settlement of every new country, 
individual enterprise has been obliged to go forth 
to contend with the various forces of nature; to 
subdue the savage, to cut down the forests, to ex- 
terminate the animals of prey, to endure the hard- 
ships and privations of every kind, to encounter 
sickness and disease, and to face death in a hun- 
dred forms in order to prepare the new-found land 
for the requirements of civilized man. As popu- 
lation increased and communities were formed, 
this same individuality and independence of ac- 
tion led to the adoption, by various persons, of all 
the numerous occupations that are necessary to 
supply the wants of society. 

So long as the laborers were few and the wants 
many, the efforts of all were required to supply 
the demands of the community, and there was no 
competition. As soon, however, as the needs of the 
people began to be in a measure supplied and two 
persons were obliged to bid against each other for 
the favor of the community in any particular line 
of trade or pursuit, competition had set in, and 
what is now known as the competitive system had 
begun to operate. 



Trusts and Monopolies. 9 

In its early stages the most familiar form of 
competition was that carried on between the store- 
keepers in the towns, but it also animated the strife 
between the producers of various kinds of wares, 
and with the development of the factory system, 
it assumed its greatest importance and attained its 
fullest development in connection with that class 
of business. 

The competition of the small storekeepers is 
more or less familiar to every one, particularly to 
those who have been raised in small towns. In 
large cities nothing seems ever to have had a be- 
ginning. There never was, apparently, any first 
store, but there has always been an abundance of 
them; competition is sharp and incessant; oppor- 
tunities of every description are plentiful; condi- 
tions of all kinds, whether for good or evil, seem 
to be highly developed, and every economic prin- 
ciple appears to have been always in operation, 
while in the small town there are many who remem- 
ber when the first storekeeper had the entire trade 
of the village all to himself. He knew no opposition 
and could conduct his business to suit his own 
pleasure. He need go to no expense in fitting up 
his store to make it attractive or inviting to the 
public, nor go out of his way to solicit trade, for 
those who desired to purchase must come to him. 
He could make prices to suit the convenience of his 
own business, limited only in a measure by the dis- 
tant markets of the large cities. 

This independence, however, was not destined to 
be long-lived, for a second store soon appeared in 
the town. The new aspirant, in order to secure 
business, had to overcome some part of the prestige 



IO 



Combinations, 



attained by the older merchant, and he was there- 
fore obliged to exert himself to please and attract 
the public. He usually began by endeavoring to 
give an inviting appearance to his store, by dis- 
playing greater taste in the selection and exhibi- 
tion of his wares; he strove to be more attentive 
and obliging to his customers, offered to deliver his 
goods at the homes of purchasers and sent agents 
out to solicit orders. He also in many instances 
cut prices and thus compelled his competitor to 
sell at reasonable figures or else lose his trade alto- 
gether. 

This unusual activity on the part of the new- 
comer was not without its effect upon the older 
merchant. He was, in a measure at least, obliged 
to meet every innovation adopted by his new com- 
petitor, as well as to conform to his reduced prices. 
The contest having once begun, it continued to be 
urged with increasing vigor, just as in a game of 
checkers each play calls for a corresponding move 
on the part of the other party. Each strives to 
take every possible advantage of his adversary, and 
the more successful he becomes the greater priv- 
ileges he is allowed ; just as the checker which has 
been successfully carried through the forces of the 
opposition may disregard many of the rules by 
which the others are restricted. 

New fixtures and an attractive interior presented 
by one store called for equally fine fittings and a 
display store-front by the other. More clerks and 
errand boys to wait upon the customers of the one, 
was met by the delivery wagon to serve the conven- 
ience of those of the other, and illumination and 
conspicuous display of wares by one, led to adver- 



Trusts and Monopolies. n, 

tising of various kinds by his rival. Each vied 
with the other in his efforts to procure the choicest 
goods from even the most distant markets, and the 
latest and most inviting patterns were placed be- 
fore their customers. The utmost ingenuity and 
incessant labor were devoted to the development of 
the art of collecting merchandise and presenting it 
in an attractive manner to the purchasing public, 
and every convenience that genius could devise 
was employed to bring merchant and consumer 
closer together. 

Other competitors, of course, entered the contest, 
but these were merely so many additional players, 
which simply added zest to the game. Each con- 
tributed his might to spur the others on, but was 
in turn compelled to keep pace with them. 

It not infrequently happened that in the bitter- 
ness of competition prices were reduced so low as 
to destroy all possibility of making profit, goods 
being often sold below cost in order to outdo com- 
petitors. In the earlier stages of the development 
of the system, however, most merchants were on a 
comparative equality so far as capital was con- 
cerned, and since neither could afford, much longer 
than the other, to conduct his business at a loss, 
the result was usually a cessation of hostilities, suc- 
ceeded by a period of mutual toleration which 
proved to be highly beneficial to the community; 
protecting it against the danger of extortionate de- 
mands by a monopoly on the one hand, and secur- 
ing to it the advantages of superior service induced 
by competition on the other. 

Larger amounts of capital soon began to be in- 
vested in mercantile business, and with it the com- 



12 Combinations, 

petition became sharper than ever. The greatest 
resources at their command enabled merchants to 
attempt many things which had hitherto been im- 
possible, and provided them with the means of 
carrying the competitive warfare against the 
smaller tradesmen even to the point of extermina- 
tion, for they knew that after they had once 
driven competition from the field, they could raise 
prices to such a point as would speedily restore to 
them all the profits which they had sacrificed in 
the competitive struggle. 

The instinct of self-preservation soon began to 
lead the smaller dealers to combine in order to re- 
sist the attacks of their more powerful competitors. 
Two or three individuals would unite, putting their 
joint resources into the business, and would thus 
for a time be able to continue the contest. These 
partnerships proved popular and successful for a 
while, but like everything else in the competitive 
world, each new departure merely serves as a 
step to something higher. One partnership led to 
the formation of another still stronger, and so they 
continued to increase in number and in power 
until they, too, were found to be inadequate for the 
requirements of the trade. 

Combinations capable of an almost unlimited 
number of individual shareholders, and possessing 
much greater power than partnerships, now began, 
to be formed. They were known as stock companies, 
or corporations, and by means of these the greatest 
aggregations of wealth have become practicable 
and the exercise of the most stupendous powers 
ever known to the world has been made possible. 
Corporations now began to supplant the individual 



Trusts and Monopolies. 13 

and to assume control of trade. The advantages 
of corporate management (among which were the 
limited liability of the shareholders and the greater 
facility for raising capital) were so important in 
the conduct of business on a large scale that, after 
the first prejudices, which always retard the in- 
troduction of a new system, had been dissipated, 
the organization of corporations for all kinds of 
purposes became quite general. The formation of 
a company in one line of business compelled the 
creation of others to compete with it and thus the 
movement spread until for many years the greater 
part of the business of the country has been con- 
ducted by corporations. The competition begun by 
individuals possessing little capital was continued 
by the corporations with all the rigor and severity 
that the shrewdest management could devise and 
that large capital and great power made possible. 

The history of competition among manufacturers 
has been very much the same as that which we 
have just outlined as existing between the venders 
of their products. In the early days when practi- 
cally all manufactured products were made by hand 
labor, the same rivalry existed between the indi- 
vidual producers which has since been developed 
into the most relentless competition between giant 
manufacturers, though of course it was not mani- 
fested in the same way. 

It may easily be supposed that the competition 
between the early producers was conducted in much 
the same way as that between rival blacksmiths, or 
those engaged in any other of the occupations com- 
monly known as hand trades, at the present time, 
in which mechanical skill, natural taste, tact, per- 



14 Combinations, 

sonal characteristics, and accomplishments are 
largely relied upon to secure for their possessors a 
fair share of the business. 

With the introduction of machinery and power, 
however, substantial advantages in production be- 
gan to be substituted for mere differences in in- 
dividual capabilities as a means of extending trade. 
The adoption of the factory, or co-operative system 
of production in which many persons were em- 
ployed in large establishments with the aid of 
power and machinery, afforded so many important 
advantages over the old system of shop work, that 
I it speedily compelled those engaged in the manu- 
facture of the same class of goods either 
to adopt the system or to retire from 
competition with those who had done so. 
Every new tool or piece of machinery that 
was devised likewise gave to those who first 
employed it a material advantage over all com- 
petitors who had not yet done so, and thus com- 
pelled them to seek its aid in order to keep pace 
with the times. The readiness with which the 
latest and most improved appliances were adopted 
by manufacturers, and the passionate fondness of 
the American people for the new and the wonder- 
ful, have stimulated the inventive genius of the 
age to such a degree of activity that the manufac- 
turing and industrial achievements of the last cen- 
tury have become the wonder of the world. 

The same evolution in the form of organization 
and in the size of the establishments which we have 
already noted in relation to mercantile business,, 
has also taken place in the manufacturing world. 
The shop in which the proprietor and his appren- 



Trusts and Monopolies. 15 

tice worked together at the bench developed into 
the factory in which many persons were employed 
and which was noisy with the sound of the re- 
volving wheels of machinery; into the firm 
in which the capital of two or more joint 
proprietors was invested, and which employed 
a great number of men and still more exten- 
sive machinery; and finally into the corporation 
in which the proprietors as shareholders may be 
numbered by the thousand, which may control 
an almost unlimited number of employees, and in 
whose plants the most marvellous machinery is in 
operation. 

The excessive sharpness of competition has, at 
times, led to the production and sale of inferior 
grades of goods of various kinds, and numerous 
frauds and deceptions have been practiced by un- 
scrupulous parties in their efforts to maintain 
an unequaled competition. In some cases, how- 
ever, this has been due to what may be termed the 
over-growth of the competitive system; in others, 
it is one of the natural evils which is bound to re- 
sult from individual competition, while in many in- 
stances it has been the work of irresponsible per- 
sons who have had no intention of acting in good 
faith, and whose misdeeds cannot, therefore, prop- 
erly be charged as among the effects of the eco- 
nomic system which chanced to be in operation at 
the time. 

These large corporations which had now assumed 
control of nearly every line of trade, carried on the 
competitive struggle with the utmost severity, and 
employed every means that ingenuity could invent 
to undermine and destroy their competitors, and to 



ii6 



Combinations, 



drive them out of business, but finding that these 
means failed to clear the field of opposition, or 
growing weary of the struggle, they began to re- 
sort to agreements between the competing concerns 
for the purpose of fixing prices, to divide terri- 
tory between them, etc., and those who refused to 
voluntarily become parties to these arrangements, 
were then forced to join, or fight the united strength 
of the combination. 

Such has been the origin and growth of what 
is commonly known as the competitive system. It 
means merely the independent production, manu- 
facture or sale of any commodity by several indi- 
viduals, each of whom is striving to secure a larger 
share of the trade than his competitors, and who is 
usually willing to employ every means at his com- 
mand to attain his end. 

It is under the competitive system that our 
country has attained to its present position of 
wealth, power, and influence among the nations of 
the world; it is under this system that the re- 
sources of our country have been developed, and the 
hidden treasures of the earth have been brought 
forth to swell the volume of that ever-growing 
commerce which is already carrying the products 
of our workshops and of our land into the remotest 
corners of the earth. It is under the stimulus of 
competition that the genius of our people has made 
invention after invention which have revolution- 
ized all processes of production, of manufacture 
and of transportation, have greatly increased the 
efficiency of labor, and have made our machinery 
and the equipment of our factories and our mills 
the study and admiration of the master mechanics 



Trusts and Monopolies. 17 

throughout all parts of the civilized world. Most 
of us have been taught to regard the state of uni- 
versal competition as the normal and ideal condi- 
tion of the industrial world, the stimulating force 
to promote and hasten its extension and develop- 
ment, and the automatic governor to regulate and 
control it in its maturity. 

In speaking of the benefits to be derived from 
the competitive system, however, we have always 
had in mind the competition of comparatively equal 
forces. While the opportunities of all the parties 
are equal, the hope is ever entertained that each 
may be able to excel the other, and all are inspired 
to put forth the best work of which they are capa- 
ble. If, however, a material advantage be given 
to some and denied to others, the hope of the less 
favored is gone and the zest is taken out of the con- 
test, and those possessing the advantage may move 
leisurely on to victory, while the less fortunate are 
obliged to pursue a hopeless struggle for existence. 

The competitive system has been in operation in 
Europe as well as in this country, but there has 
never been that equality of opportunity which has 
existed here. The greater part of the capital has 
always been controlled by a few firms, or they have 
been favored by governmental patronage or pro- 
tection, while the opposition of their smaller com- 
petitors has not been sufficiently strong to stimulate 
them to any great efforts. Much has been accom- 
plished along old established lines, and some im- 
provements have been made, but no such progress 
has been attained as has characterized the develop- 
ment of our industries. 

It is the same spirit of individuality and in- 



1 8 Combinations, 

dependence of action which led the adventurer 
forth to battle with the uncouth forces of nature, 
that has ever since directed the course of that 
competitive struggle which has sharpened the wits, 
inspired the genius, and spurred into activity 
every faculty of our people and developed the 
varied resources of our country. It has always 
led the way, and the multitude has followed. It 
has suggested every link in the long chain of im- 
provements reaching from the rough board 
counter in the primitive country store, to the mer- 
cantile palace in the large city. It is the life of 
competition, and competition has built up all 
the great industrial institutions of to-day, and 
made possible all those wonderful results which 
combination is now securing through its operation 
of them. Combination, or co-operation, has thus 
far merely taken over and combined the properties 
created and established by competition. It has in- 
troduced a new system of control, and effected 
numerous economies in their management, but 
as yet it has added nothing distinctly new to the 
means of production, or to the institutions which 
mark the progress of the world's material develop- 
ment. 

Competition has been recognized from the very 
earliest times as the natural condition of trade and 
the safeguard of the rights of the consumers, and 
the common law has for centuries been very severe 
and emphatic in declaring all combinations in re- 
straint of trade to be contrary to public policy and 
therefore to be prohibited. Many attempts have 
been made to form combinations to agreements for 
the purpose of neutralizing the effects of competi- 



Trusts and Monopolies. 19 

tion in particular lines of industry, but owing to 
the intervention of the law, or the want of good 
faith on the part of the contracting parties, they 
have always failed in their purpose until within the 
last thirty or forty years. It was about the begin- 
ning of this latter period that combinations in re- 
straint of trade began to be more or less effective, 
and the evolution of the modern trust or monopoly 
began, passing as it did through all the various 
stages of development from the mere working 
agreement to the mammoth corporation, the chief 
forms of which are herein elsewhere described. With 
the success of these combinations came the decline 
of competition. This system has been supported by 
the existing laws and by new statutes made espe- 
cially for the purpose, by the long and continued 
usage of centuries, by the apprehensions of the peo- 
ple that they were about to be subjected to unjust 
and unreasonable oppression, and by the reluctance 
and timidity of capitalists to risk their fortunes 
in the attempt to establish a new scheme of indus- 
trial economy. The monopolistic system, on the 
other hand, was supported by the prospect of large 
and speedy profits, and by a host of professional 
promoters who sought to acquire large personal 
profits as a bonus for effecting organization among 
the firms engaged in a particular line of industry. 
The struggle between the two systems has, there- 
fore, been long and obstinately contested, and it is 
only within the last six or eight years that the 
supremacy of monopoly appears to have become es- 
tablished, and the rush to combination has become 
precipitate. 

The benefits of the competitive system are, as 



20 



Combinations, 



we have seen, all to be derived from a state of com- 
parative equality of opportunity, and may be 
summarized as follows : it stimulates invention and 
production; it insures the manufacture or 
rendering of the best commodities and service 
to the consumer; it secures and maintains 
a reasonably low price to the purchaser; it 
allows the payment of fairly good wages 
to the producers, and to all employees, and 
affords a reasonable profit to the competitors. 
The evils of the system, on the other hand, arise 
from inequalities of competition, — disportionate op- 
portunities discourage enterprise; — it induces de- 
ception and fraud in the manufacture and sale of 
goods; it causes great fluctuation of prices, from 
exorbitantly high at times to ruinously low at 
others. Inequality among competitors leads to the 
continual cutting of the wages of employees, and 
in many instances reduces the producers of raw 
materials to the position of mere servants of the 
large consumers, and occasions an endless, bitter 
strife among competitors which results in large 
profits to a few, a mere struggling existence to more, 
and ruin to many. 

The competitive system, in its free and natural 
application, has proved highly beneficial ; but from 
its abnormal development, or what may be termed 
the transition from the competitive to the co- 
operative or monopolistic system, many evil effects 
have resulted and numerous abuses have arisen for 
which it is very desirable that remedies shall ba 
found either by the complete adoption of the sys- 
tem to which the transition is leading or by suit- 
able regulation and restriction upon the existing 



Trusts and Monopolies. 21 

system. Whether we consider the present indus- 
trial movement to be the substitution of a new sys- 
tem of monopoly for the old system of competition, 
or consider it to be merely the natural and logical 
: development of the competitive system, the result 
. is the same, and the fact remains that competition 
i is rapidly giving way in all lines of industrial 
| activity to a system of co-operative control or 
monopoly, and if any of the good features of com- 
petition are to be preserved in order to serve as a 
check upon the absolute power of a unified control 
of trade, it must be through the aid of wise and 
judicious legislation. 



22 Combinations, 



CHAPTER III. 

OBJECTS OF COMBINATIONS. 

Among the principal causes which have lad to 
the formation of trusts and combinations, may be 
mentioned the sharpness of competition; the ex- 
haustion of many of the sources which have hitherto 
offered large speculative gains; the lowering of the 
rates of interest upon money; the financial and 
business panic of 1893; and the prospect of se- 
curing larger profits by acquiring control of the 
various necessities of life and then conducting the 
production and manufacture of them upon the 
largest possible scale. 

Competition had been carried to such an extent 
in many lines of trade that profits were reduced 
to a very low margin. Many manufacturers found 
it difficult to meet the running expenses of their 
business, and were rapidly becoming discouraged. 
The future gave no promise of relief, but seemed 
rather to have only greater trials in store for them, 
and any alternative that promised hope of improve- 
ment was welcomed by those who saw only loss and 
disaster awaiting them. 

The completion of various public works, such 
as the great railway systems of the country, in the 
construction of which large sums of money were 
employed, and the gradual payment of the national 



Trusts and Monopolies. 23 

debt, all of which released many millions of dol- 
lars annually, served to increase the volume of capi- 
tal seeking investment and thus directly tended to 
lower the rates of interest. 

This lowering of the rates of interest and the 
closing of many fields in which fancy profits had 
formerly been gathered, directed attention to the 
more commonplace articles of everyday consump- 
tion, and the possibilities of industrial develop- 
ment as applied to these commodities began to be 
seriously considered. 

The panic of 1893 had reduced most of the in- 
dustrial institutions of the country to a state of 
great financial distress, which made them an easy 
prey to those who had studied the opportunities 
presented by large scale production, and who were 
able to control a sufficient amount of capital to 
take advantage of them. 

Among the benefits to be derived from the com- 
binations of manufacturing establishments, the fol- 
lowing have been most strongly emphasized by cor- 
poration promoters and those who have been par- 
ticularly active in bringing together the various 
elements which constitute the great industrial com- 
binations of to-day : the reduction of fixed charges 
such as the amount paid for salaries of superin- 
tendents, foremen, bookkeepers, salesmen and 
others, whose services are usually required to be 
retained throughout the year; a substantial 
saving in rent or in the amount of interest required 
to be charged upon capital invested by diminish- 
ing the number of establishments to be maintained ; 
a decrease in the cost of repairs and operation by 
employing a smaller number of plants and avoid- 



24 Combinations, 

ing the duplication of machinery, by using only 
the modern appliances and by working them to the 
most full limit of their capacity ; a material reduc- 
tion in the relative expense of light, heat and power, 
and ventilation; the distribution of orders so that 
the goods may be produced at the points most con- 
venient for manufacture, transportation, and de- 
livery ; the power to procure raw materials in such 
markets, and in such quantities as will enable the 
purchasers to secure the most favorable terms ; tfye 
superior opportunities presented for advertising 
their products, and of affording such inducements 
to the trade as would secure for the combination 
a virtual monopoly of the business and enable it 
to regulate and maintain prices, and the prospect 
of being able to extend its trade into foreign mar- 
kets, thus opening up new sources of profit. 

The contemplation of the possibilities of com- 
bination, as suggested by the plants just indicated, 
coming as it did at a time when so many considera- 
tions seemed to necessitate the abandonment of the 
position hitherto maintained, led to the unprec- 
edented rush to combination which succeeded so 
closely upon the panic of 1893. It may, therefore, 
be useful to examine, somewhat in detail, the vari- 
ous objects which these combinations seek to ac- 
complish, so that we may better understand their 
effects, and be able to discern the proper remedies 
of restrictions to be applied to them. 

The minimizing of expenses, the elimination of 
waste, and the control of the market, are the ideals 
of the modern corporation. 

In the operation of small, independent estab- 
lishments the services of proprietors, managers, or 



Trusts and Monopolies. 25 

corporation officers are to be considered in connec- 
tion with each, and the smaller the output, the 
greater will the relative cost of their salaries ap- 
pear. Foremen or superintendents have also to be 
employed varying in number according to the size 
of the plant and the variety of the work to be done. 
It is seldom found possible to place these in charge 
of as large a number of men as they are capable of 
directing, and to just the extent that the service 
rendered falls short of their full capacity, are their 
salaries wasted to their employers. It is the same 
as though an ordinary mechanic would do only 
three-quarters 01 a day's work, and draw a full 
day's pay. Most of these establishments have also 
been obliged to close down for a longer or shorter 
period at least once a year, and it is usually neces- 
sary to retain these foremen or superintendents on 
the pay roll, thus creating another element of waste 
which must be made up by increasing the cost to 
the consumer of the manufactured article. In 
very large corporations or combinations, however, 
one set of officials will discharge the same duties 
,which many were required to perform for the sev- 
eral smaller institutions which have been absorbed 
by it. Superintendents and foremen will be as- 
signed to departments in which their capacities 
will be taxed to the utmost, and having secured a 
virtual control of a large percentage of the trade, 
the plants may be kept more steadily employed, 
thus eliminating, as far as possible, all waste in 
the directions just indicated. 

Every business necessitates a certain amount of 
office work, such as bookkeeping, correspondence, 
billing, etc., which require the services of bookkeep- 



26 Combinations, 

ers, clerks, and stenographers, and as much of this 
work is the same whether the output be ten thou- 
sand or one million dollars per annum, it is ap- 
parent that the cost of office work is relatively 
much greater for small establishments than for 
large ones. As the numerous independent concerns 
engaged in a particular business are gathered into 
combinations or into huge corporations, the cost of 
office service is greatly reduced by dispensing with 
the several sets of books formerly required, and 
keeping but one set, which may comprehend the en- 
tire business transactions of the combination, and 
yet require the services of only one competent book- 
keeper and a few assistants, thus displacing most 
of the skilled accountants hitherto employed by the 
individual firms. The clerical work has also been 
systematized so that the amount formerly done in 
many offices can now be performed in one with a 
much smaller force of help, and the waste in office 
service has been reduced to a minimum. 

In the competition of independent manufactur- 
ers the sale of their products has been chiefly ef- 
fected by means of traveling salesmen who were 
employed to exhibit them throughout the country. 
The salaries paid to these men have usually been 
large, their hotel and railway expenses have been 
high, and while they seem to be a necessity of the 
system under which they were employed, yet their 
maintenance added materially to the cost of goods 
to the consumer. As these establishments unite 
into larger corporations and the competition be- 
tween them disappears, the necessity for traveling 
salesmen likewise ceases to exist, and the saving 
of their salaries and expenses, alone, amounts to 



Trusts and IVfonopolies. 27 

an important item to the combination. The unit- 
ing of the competing firms compels the merchant 
to seek for the goods which he desires to purchase, 
so that with the services of a few salesmen, just 
sufficient to meet the convenience and necessities of 
the trade, the combination will be able to do just 
as much business as did its component parts, and 
the saving of this expense will be clear profit to the 
corporation. Mr. P. E. Dowe, President of the 
Commercial Travelers' National League, testifying 
before the Industrial Commission in 1899, esti- 
mated the amount saved in this way alone to have 
been one hundred fifteen million dollars per an- 
num. 

The rent account, or its equivalent, the interest 
to be charged on the capital invested in the build- 
ings and grounds occupied, is always an important 
item in the expense of manufacturing establish- 
ments, and like most other things in business, the 
more space they require the cheaper it can be had. 
Thus, by merging a number of small concerns 
into one large corporation, it not only becomes 
practicable to use only large buildings at relatively 
small rental, but in most instances, the number of 
establishments may be reduced and many of the 
original plants abandoned. The rent account will 
therefore be greatly reduced, while the output 
will not thereby be necessarily diminished. In 
the Twelfth Census of the United States, 
Volume Seven, Manufacturers, Part One, it 
is shown that two thousand two hundred 
sixteen manufacturing plants were controlled 
by one hundred eighty-five industrial com- 
binations, of which number one hundred seventy- 



28 Combinations, 

six were reported as idle during the census 
year. The cost of light, heat, ventilation, and 
power, will also be much less owing to the de- 
crease in the number of buildings to be supplied, 
and the greater compactness and convenience of 
the space occupied by the work. 

Where there are many concerns engaged in the 
manufacture of one particular line of goods, great 
inequalities will always be found in the equipment 
of the several plants. They were established at 
different times and each was, perhaps, at the time, 
provided with the best appliances of the day, but 
the natural tendency of those who have already in- 
vested large amounts of capital in their business, 
to resist the introduction of new machinery which 
w T ould put them to still greater expense, coupled 
with the disposition to use the old as long as it can 
possibly be made to serve the purpose, generally 
results in a very wide difference in the productive 
power of the various plants at any one time. If 
all the establishments engaged in a given line of 
production were constantly to adopt all the new 
appliances that were proposed, the expense of doing 
so would be very great, and must temporarily, at 
least, add to the cost of manufacture; yet if any 
refused to go to that expense, they would be obliged 
to compete at a disadvantage, which must result in 
a reduction of their profits, and possibly in loss. In 
the case of a large corporation, however, in which 
all, or most of these concerns have been merged, 
only the best machinery would be retained, in the 
first place, and as improvements are introduced, 
the purchase of one set will often suffice to do the 
same work for which many would be required to be 



Trusts and Monopolies. 29 

provided under independent management. As we 
liave before remarked, the lack of orders usually 
requires small factories to close down at more or 
less frequent intervals, which not only occasions a 
loss of the service of employees, but the loss of the 
use of the machinery as well; w^hereas in a 
large establishment, more steady employment 
makes it possible more nearly to get the full use 
of the machinery, and it therefore requires less 
to accomplish the same results. 

In the production of heavy and bulky commodi- 
ties, the location of the plant and the cost of trans- 
portation, both of the raw materials and of the 
finished products, have much to do with restrict- 
ing the trade of an independent establishment to 
a limited section of the country; whereas a large 
combination operating several widely scattered 
plants may so distribute its orders that the goods 
may be manufactured in those factories most con- 
Tenient to the place of delivery, thus reducing the 
item of freight charges to the minimum and secur- 
ing a material advantage over its more distant 
competitors. Mr. John W. Gates, Chairman of 
the American Steel and Wire Company, testifying 
of the affairs of that company before the Indus- 
trial Commission in 1899, says: "The cross freight 
saving is quite an important item. I should 
think the cross freights would amount to half 
a million or one million dollars a year. It is a 
saving in that particular/' 

There is, perhaps, no fact more familiar to com- 
mon experience in the mercantile world than that 
the larger the quantity of material required, the 
more favorable the terms on which they may be se- 



30 Combinations, 

cured. The advantages of purchasing in large 
quantities may in some measure be diminished in 
cases in which it is sought to exhaust the market, or 
where a monopoly has obtained control of the ma- 
terials desired, but these are the exceptions and 
not the rule. The advantages to be derived from 
large purchases arise, in the first place, from the 
fact that the amount of capital involved in the 
transaction is sufficient to warrant the buyer in re- 
sorting to distant and even to foreign markets if 
need be, to secure more favorable rates. In the 
next place, the requirements of the business enable 
him to make contracts for large quantities of ma- 
terials to be delivered at stated times in the future, 
thus securing regularity in the supply, and almost 
invariably obtaining lower prices; and finally as 
the scope ot, the establishment expands, it may 
even acquire and operate the sources from whence 
its raw materials are derived. This last arrange- 
ment would secure to it the benefit of all profits 
that might otherwise go to the dealers in crude 
products, and render it practically independent of 
all other considerations save the labor that it must 
employ, and the market in which it must sell. The 
United States Steel Corporation affords a conspicu- 
ous instance of the development of this feature of 
industrial economy, though others might be re- 
ferred to. The small manufacturer, on the other 
hand, is ordinarily compelled to purchase in the 
local market. As his business is small and usually 
irregular, he cannot contract for any great quantity 
of materials in advance and is therefore frequently 
made the victim of his own necessities and obliged 
to purchase as it is required, regardless of the con- 



Trusts and Monopolies. 31 

dition of the market ; and far from hoping to con- 
trol the sources of his supplies, the smallness of 
his orders leaves him almost entirely at the mercy 
of the local producers. 

A large combination or corporation with plenty 
of capital at its command can afford to adopt many 
means of advertising, and of introducing its wares 
that would be wholly beyond the reach of a smaller 
concern. The large volume of its business would 
in many instances enable it to secure special rates 
and favors from transportation companies, which 
would give it a material advantage over its competi- 
tors, and by reason of these, and the several econ- 
omies possible to large scale production which we 
have just enumerated, it might easily undersell 
its smaller rivals. This it may do for a longer or 
shorter time according as its design may be to 
drive them out of business entirely, or merely to 
take away a certain portion of their trade ; but in 
either case, it can readily place itself in a position, 
to dictate prices. 

The many advantages thus secured to combina- 
tions of manufacturing establishments enable them 
not only to control the home trade, but to invade 
the foreign markets as well, and to sell in every 
part of the world in competition with the older 
manufacturers of Europe. To secure these mar- 
kets it has been necessary to expend large sums 
of money in sending agents to all parts of the world 
to introduce their goods, and to compete with the 
representatives of European houses, but our large 
corporations are already doing this, and that they 
are meeting with success in their efforts to find 
sale for their goods in foreign lands is amply at- 



32 



Combinations, 



tested by the government records of the exports of 
manufactured articles from this country which 
amounted to $403,890,763 in the year 1902. 

A better appreciation of the rapidity with which 
this foreign trade has grown within the last few 
years may be derived from an inspection of some of 
the figures presented in the tables prepared for the 
Annual Eeview of the Foreign Commerce of the 
United States, and Summary Tables of Commerce 
and Production for the year ending June 30, 1902, 
by the Bureau of Statistics of the Treasury De- 
partment of the United States. The values of the 
principal articles of domestic manufacture, by 
classes, exported from the United States is there 
shown to have been as follows for the years indi- 
cated : 

Iron and steel 1890 $25,542,208 

1900/ 121,913,548 

1902 98,552.562 

Copper 1890 .... 2.349,3fcJ 

1900 57,852,960 

1902 41,218,373 

Agricultural implements 1890 3,859,184 

1900 16,099,149 

1902 16.286,740 

TVood manufactures 1890 6,509,645 

1900 11,232,838 

1902 11,617,690 

Mineral oils, refined 1890 44.658,854 

1900 68,247,588 

1902 66,218.004 

Chemicals, drugs, dyes, etc 1890 5,424,279 

1900 12,132,373 

1902 12,141,011 

Leather, manufactures of 1890 12,438,847 

1900 27,293,010 

1902 29 798 323 

Cotton manufactures 1890 ! '.'.'/.'.'. '. 9^999!277 

1900 24,003,087 

1902 32,108,362 

Paraffin and paraffin wax 1890 2,408,709 

1900 8,602,723 

1902 8,858,844 

Paper, and manufactures of 1890 1,226,686 

1900 6,215,833 

1902 7,312,030 



Trusts and Monopolies. 33 

It may also be seen from the same report that 
the total exports of domestic manufactures in- 
creased only twelve and eighty-one hundredths per 
cent, from 1877 to 1890, while during the period 
from 1890 to 1900 they increased one hundred 
eighty-seven and twelve hundredths per cent. 

This remarkable showing of the development of 
the export trade of our American manufacturers 
would seem to afford the most convincing evidence 
that combinations have succeeded in effecting many 
of the results which they sought to accomplish 
through large scale production, and it will not be 
necessary to say anything further on that point. 



34 Combinations, 



CHAPTEE IV. 

FORMS OF ORGANIZATION*. 

The foregoing considerations having led capital- 
ists to look to combination as a hopeful means of 
securing larger profits, and having convinced them 
that the advantages offered were sufficient to war- 
rant the trial of so new a system, the next thing to 
be inquired into was the form of organization to be 
adopted. 

In considering the subject of organization, we 
might very properly begin our inquiry with the 
first combination formed between two individuals 
for the purpose of engaging in business or con- 
ducting some other enterprise which was beyond 
the capacity of either to undertake alone, for the 
modern corporation is merely the last stage yet at- 
tained in the development of that first union. The 
combination which we have now in mind, however, 
is that of a number of business units, many of 
which have long been established, and each of 
which had certain rights or interests which were 
sought to be preserved under the new form of or- 
ganization. Among the concerns which sought to 
be consolidated, many were the property of indi- 
vidual proprietors, others were partnerships, and a 
large number were corporations. It had long been 



Trusts and Monopolies. 35 

the policy and purpose of the laws of many of the 
states to discourage and prevent the merger or 
affiliation of any kind between corporations, and 
this, together with the natural desire of proprie- 
tors to wish to retain the largest possible degree of 
control over their property, led them to seek to de- 
vise some form of organization which would pre- 
serve in the largest measure the identity of the 
uniting concerns. 

The dominant idea in all the early attempts at 
combinations was, therefore, to secure united action, 
and control of a particular line of business, and at 
the same time causing the least possible inter- 
ference with the affairs of the individual estab- 
lishments engaged in it. The first and simplest 
form of organization attempted was that of the 
working agreement by which the several concerns 
engaged in a certain business undertook to 
maintain certain established prices or rates, or to 
conform to other regulations as to the conduct of 
their affairs. This left the management of the 
several establishments entirely in the hands of their 
proprietors, restricted only by the terms of the 
agreement, and in that respect fulfilled the ideal of 
the form of organization sought. These agree- 
ments, however, were in the nature of restraint upon 
trade, and odious to the law, and as they were like- 
wise repulsive to the public, the fact of their exist- 
ence was obliged to be kept secret, and it was 
difficult, therefore, to detect those who chose to 
violate their terms. As the conditions of these 
agreements were left to be performed by each of the 
members in connection with the conduct of the af- 
fairs of his private business, it is easy to suppose 



36 Combinations, 

that many yielded to the temptation to cut prices 
or otherwise to violate their provisions in order to 
secure the trade of some desirable customer. Since 
jthe aid of the courts could not be invoked to en- 
force these contracts, these combinations have been 
obliged to depend for their preservation upon the 
good faith of their members, and this has usually 
been found to be a very poor anchor upon which to 
depend in commercial affairs. 

The great freedom of individual action allowed 
by this form of organization together with its ina- 
bility to command the obedience of its members, 
soon made it apparent that this was not the form 
of organization required for great undertakings 
in which unity of purpose, and promptness and de- 
cision of execution were indispensable, and other 
modes of combination began to be sought. 

The working agreement, however, is the simplest 
means of bringing together the numerous con- 
cerns engaged in any particular business, and as 
may be supposed, in spite of its many defects, it 
lias been more frequently employed than any other. 
The ease with which these agreements may be ef- 
fected even in defiance of the laws which seek to 
suppress them, renders them particularly conveni- 
ent in those eases in which complete consolidation 
is not desired, for it is considered that even though 
individuals may at times disregard their provisions, 
yet in the main they will be adhered to, and many 
of the benefits of combinations may be secured. 

While other and more perfect forms of organiza- 
tion have been devised, some of which have openly 
and successfully withstood the numerous assaults 
made upon them by those who regard combination 



Trusts and Monopolies. 37 

among industrial institutions as an unmitigated 
evil, the secret agreement has continued to be em- 
ployed in many quarters, and is still the basis of a 
substantial union in many branches of trade in 
which no combination is generally supposed to 
exist. The officers representing an association of 
the coal mine operators of Indiana and Illinois 
were recently indicted for regulating the coal busi- 
ness in that way, and it was openly charged at the 
time that hundreds of similar associations and 
agreements might be found in connection with 
nearly every important line of trade. 

The next mode of combination adopted was an 
agreement by which the market was apportioned 
between the several establishments, each being re- 
quired to confine its trade within the territory as- 
signed to it. In this form of organization, the 
combination assumed more direct control over its 
members than under the simple agreement, and 
while it was still unable to invoke the assistance 
of the courts, or to summarily enforce its com- 
mands, yet the transgressions of offenders might 
much more easily be detected and modes of pun- 
ishment could be devised. The coal dealers' asso- 
ciation, to which we have just referred, was said 
to have employed this form of regulation, also. 
The trade of a particular town or section 
of a city or of the country was allotted 
to a certain dealer, and all those who de- 
sired to purchase were obliged to resort to him, 
for the mine owners refused to sell their coal to 
any other dealers in the same territory. These 
agreements are, however, also illegal, and they will 
be speedily dissolved by the courts wherever their. 



38 Combinations, 

existence can be proved. It is necessary, therefore, 
to preserve the strictest secrecy regarding them and 
their affairs, and this, together with the same ob- 
jections which apply to the other class of agree- 
ments to which we have referred, serves to render 
them undesirable and unsatisfactory forms for per- 
manent organization. 

Another form of combination is that by which 
the business of the country, or of the district 
designed to be affected, is apportioned among the 
several parties to the agreement, a certain per- 
centage being assigned to each according to its 
capacity, or other agreed mode of division. It dif- 
fers from the form last shown in that it does not 
attempt to restrict the sphere of operation of the 
several establishments. It leaves each member free 
to conduct the details of his business in his own 
way, but requires him to bring the proceeds into a 
common fund from which each draws his allotted 
percentage, and the combination is called a pool. 
This form of organization has been most commonly 
employed among railroad companies, and the ef- 
forts to suppress it have given rise to much litiga- 
tion. It was also one of the chief factors which 
led to the establishment by Congress of the Inter- 
state Commerce Commission for the purpose of 
preventing combinations and other abuses among 
the railroads. It is a form of this class of agree- 
ments which was shown by the testimony before 
the Industrial Commission to have existed between 
the members of the anthracite coal combination 
under which the exact percentage of the total ton- 
nage which each road was to carry for the year 
was determined in advance, and by which the sell- 



i 



Trusts and Monopolies. 39 

ing price of coal was fixed at regular meetings of 
the association. 

A departure was now taken from the idea which 
had been adhered to in all forms of combinations 
heretofore attempted, of preserving the nominal 
independence of the respective establishments, and 
of securing to the individual proprietors a large 
degree of freedom in the management and control 
of their properties. It began to be recognized that 
much of the efficiency of combination must nec- 
essarily be lost through divided management, and 
that many of the economies which it sought to ef- 
fect in production would be impossible under any 
system which seeks to continue the entire number 
of plants in operation. It was, therefore, proposed 
to place the control of the several properties in the 
hands of a few persons to be managed for the bene- 
fit of all. For this purpose a board of trustees was 
selected and the establishments were turned over to 
it, to be held and operated for the use of the real 
owners. This was precisely the same method of 
control which the law had for centuries recognized 
and approved for the management of the business, 
property, or estates of minors or others who were 
for any reason considered incapable of conducting 
their own affairs, differing from it only in the 
manner of the creation of the trust, which was in 
this instance by the acts of the beneficiaries them- 
selves, instead of through the operation of law or 
the acts of third parties, as was generally the case. 
The trustees gave receipts to the several proprietors 
for the property turned over to them which were 
called trust certificates, and the earnings of the 
trusts were distributed among the holders of these 



40 Combinations, 

certificates in proportion to the value of the prop- 
erty represented by each. Thus the integrity of 
each of the constituent firms was preserved, al- 
though it was deprived of the active management 
of its business. 
I While there has been an endeavor to conceal by 
6ecrecy the existence of some trust, yet as a busi- 
ness organization, it was conceived for the pur- 
pose of assuming an independent and permanent 
stand among the industrial institutions of the 
country, and as such it has borne the brunt of a 
large share of the litigation which has been waged 
against industrial combinations during the last 
twenty years, and has made its name the commonly 
accepted expression for industrial combinations of 
every kind whether they partake of the trust form 
of organization or not. 

The first and most important instance of this 
form of combination is that of the Standard Oil 
Trust, organized in January, 1882. It was a com- 
bination of a number of the principal oil refineries 
of the country, and the trust was formed for the 
purpose of securing a more permanent organiza- 
tion than that under which the same properties 
had been working together for ten or twelve years 
preceding that time. It continued to fight the 
battles of the combinations versus the people, and 
was the object of almost incessant litigation and the 
subject of numerous official investigations, until 
the year 1899 when it was reorganized into the 
Standard Oil Company of New Jersey. The Sugar 
Trust, organized 1887, and the Distillers' and Cat- 
tle Feeders' Trust organized in the same year, are 
the other two most familiar examples of industrial 



Trusts and Monopolies. 41 

trusts, and they have both since adopted the cor- 
porate form of organization. The operation of 
these trusts excited the fears and jealousies of the 
people, who vigorously assailed them in all parts 
of the country and the efforts to suppress them gave 
rise to the multitude of anti-trust statutes which 
have been adopted in nearly every State in the 
Union and by the National Government. 

The vulnerable point in the trust form combina- 
tion was that it preserved the identity of the unit- 
ing concerns, and merely combined them in a some- 
what different manner to that effected by the vari- 
ous forms of agreement which had preceded it. It 
is this act of persons conspiring together, or com- 
bining for the purpose of regulating or controlling 
trade, w T hich the law so strongly abhors, and the 
restrictions and limitations designed to prevent 
such concerted action soon became so numerous as 
to cause practical abandonment of the trust form 
of combination. 

All halfway measures were now thrown aside, 
the pride which attaches to the preservation of 
family name in connection with long established 
business was cast to the winds, the names of scores 
of firms, the reputation of which generations had 
labored to establish and maintain, were wiped out 
of existence and all became completely merged in a 
few great corporations. The constituent elements 
no longer preserved their distinctive identity, and 
the consolidation was complete. The very same in- 
terests were, it is true, again united under this 
new form of combination, but they no longer repre- 
sented so many individual units of organization, 
each capable of a certain amount of independent 



42 Combinations 



action and responsible to the people for their acts 
of association. They now began to throw aside 
every appearance of individual power and sought to 
organize corporations for the purpose of carrying 
on their business just as the most modest set of in- 
corporators might do. 

The new form of industrial combination which, 
now began to supersede the trust was simply that 
of the private business corporation. Some special 
powers and privileges were accorded to it by the 
laws of a few states, but the general course of pro- 
cedure and plan of organization was precisely 
the same as that pursued in the creation of the 
simplest business corporation. The properties of 
the older establishments were bought in by these 
corporations, some being paid for with stock in 
the new concerns, while others were paid for in 
cash. The new companies proceeded to conduct 
their business with all the freedom and confidence 
of institutions organized for purely legitimate pur- 
poses, with no apparent appreciation of the fact 
that they were pursuing the very same ends for 
which their predecessors had been condemned by 
law and declared to be illegal. These had been 
regularly created in the manner prescribed by law 
for the organization of business corporations, and as 
it made no difference in principle whether the pro- 
moters had formerly been engaged in the same busi- 
ness or not, or whether the properties acquired were 
entirely new or had hitherto belonged to the trusts, 
there appeared to be but little grounds for attack- 
ing these new combinations. 

No means had been devised for discriminating 
between the good and the bad use of corporate 



Trusts and Monopolies. 43 

powers, or of determining to what extent they 
might be employed or by whom they may be exer- 
cised. The people were thus caught unprepared 
to cope with this new phase of combination, and 
while some of the courts were disposed to go be- 
hind the garb of regularity, and to make the motive 
the test of legality, the temporary lull in the legal 
warfare waged upon them was sufficient to cause 
a most wonderful increase in the number of these 
monopolistic corporations, and to give to combina- 
tion a prestige and power which it had never be- 
fore attained in the history of the industrial world. 

The capitalization of these corporations has fre- 
quently been very great, the more important of 
them ranging from ten million to fifty million, a 
hundred million, and to one hundred fifty million 
dollars and upwards, and the extent of their influ- 
ence among the industries of the country can in 
some measure be imagined from the amount of capi- 
tal which they have had at their command. Among 
the more conspicuous examples of this class may 
be mentioned the three trusts to which we have al- 
ready referred, the Standard Oil Trust, the Sugar 
Trust, and the Distillers' and Cattle Feeders' Trust, 
all of which are now important corporations though 
they do not occupy as prominent positions in this 
class as they did among trusts. A table giving 
the names of one hundred and eighty-five indus- 
trial combinations, all of which belong to this class, 
is elsewhere presented in this work. 

These corporations have now come to be pretty 
generally recognized as a part of our industrial 
system and have established themselves with a rea- 
sonable degree of security in the position which 



44 Combinations, 

they now hold. Their efforts, however, to extend 
their power still further, and to include within a 
single management nearly every conceivable line of 
industry, have met with persistent opposition in 
some quarters especially in connection with their 
attempts to control the railway systems, and this 
has led to the development of still another form of 
combination. 

This new organization of capital, which seems 
destined to control so large a share of the indus- 
trial interests of the country, is what is com- 
monly known as a security holding corporation. It 
is organized in precisely the same way as any other 
business corporation, and differs from it only in 
this, that instead of directly conducting a regular 
business in the usual way, it merely proposes to hold 
the stocks of other corporations. Thus it may hold 
the controlling percentage of the stocks of many 
companies, which will entitle it to vote, and there- 
by elect its own officers and directors for each of 
these companies who will manage the business in 
the interest of the controlling corporation. These 
several establishments, which remain nominally 
independent, thus become merely the servants of 
the 'great central organization, while the new cor- 
poration which conducts no active operations of 
its own, and is apparently unimportant in the 
business world, is in reality the most successful 
means which has yet been devised for bringing 
together the varied interests of our industrial sys~ 
item. 

The number of these organizations has been 
much less than those of the class last mentioned, 
but their capitalization has usually been very large. 



Trusts and Monopolies. 45 

The most important among them are the United 
States Steel Corporation, capitalized at one bil- 
lion, four hundred and three million dollars, which 
in a large measure controls the iron and steel busi- 
ness of the United States, and the Northwestern 
Securities Company, with a capital of four hun- 
dred million dollars, which controls a number of 
the largest railroad systems of the country. The 
attitude of these combinations is that of a stock- 
holder in many corporations which seeks to manip- 
ulate them so as to promote its own private interest, 
and while they are just as truly the owners of the 
various properties which they control as though 
they directly supervised the operation of them, and 
just as guilty of the charge of combining to regu- 
late trade as the trust and other forms of com- 
bination which have preceded them, yet they ap- 
pear to have evaded the provisions of the laws 
designed to prevent consolidation, and have thui 
far successfully withstood all attempts to disrupt 
them. They have already resulted in the great- 
est aggregation of private capital that the world 
has ever witnessed, and they mark the highest 
degree of perfection which has yet been attained 
in the development of industrial organization. 



46 Combinations, 



CHAPTER V. 

POWERS AND EFFECTS OF MONOPOLIES. 

Monopoly may be defined to be the unified con- 
trol of the production, manufacture, sale, distribu- 
tion, or use of a given commodity. In its strict 
application the term means the absolute control; 
but as it is most commonly used in relation to 
practical economics, it means the command of so 
large a percentage of the commodity as will enable 
it to exercise virtual control over the entire mar- 
ket, and concerns which have attained to this de- 
gree of power, and which have developed strong 
monopolistic tendencies, are usually spoken of as 
monopolies. It is, therefore, in this general sense 
that the term monopoly is used in this work, ex- 
cept where an absolute monopoly is expressly re- 
ferred to. 

Monopolies, more or less complete, have existed 
at various times and places throughout the his- 
tory of civilization, and England in particular 
was for a long time sorely oppressed by them. 
The Crown, seeing in monopolies a fruitful source 
of revenue, both for itself and its favorites, gave 
them out with a lavish hand, until nearly every 
article of daily consumption, including the merest 
necessities of life, was controlled by private mon* 



Trusts and Monopolies. 47 

opolists. Great abuse was made of the powers thus 
granted to individuals, and the people were driven 
to such desperation in their resistance to the un- 
just oppression, that the Crown, in order to save 
its prerogative from being entirely swept away 
by a popular revolt of the common people, began 
to recall the most obnoxious of these grants as an 
act of gracious clemency to its subjects, and the 
others were later modified or removed entirely. 

The people have always regarded monopoly as 
being one of the greatest enemies of their liber- 
ties, and as we have before remarked, the com- 
mon law has for centuries looked with disfavor 
upon all agreements made in restraint of trade, 
and has done all in its power to prevent the growth 
of monopolies, and to limit by strict construc- 
tion the effects even of those which have existed 
by virtue of special grants or royal favor. In 
consequence of this deep-rooted public opinion and 
popular antagonism to monopolies, they have been 
almost unknown in this country until within the 
last few years, and their power and effects for good 
or for evil have not yet been clearly demonstrated 
to the satisfaction of our people. The operations 
of those concerns which have recently attained to 
the position of practical monopolies, have been so 
far held in check by competition, have been so in- 
volved in their relations with common carriers 
and other concerns, and have so recently begun to 
engage the serious attention of the public, that the 
ultimate effects of their successful establishment 
and development are still matters of mere specula- 
tion in the minds of our shrewdest business men 
and statesmen. 



48 Combinations, 

The powers of monopoly are very great and 
numerous, both for good and for evil. 

A corporation or combination having monopoly, 
or the practical control of a given commodity, may 
in the first place regulate its production and dis- 
tribution. It requires no discussion to show that 
such a monopoly may elect either to operate its 
plants to their full capacity or to close them down 
at will, and thus to regulate the quantity of the 
product which shall be available for the market, 
and it is equally clear that having it in its power 
to control the supply, it will be certain to exercise 
that power whenever it finds it to its interest to 
do so. It is well understood that the supply is 
one of the chief factors in the regulation of the 
price of any commodity, and since high prices 
usually mean increased profits to monopolists, the 
conclusion seems unavoidable that they will make 
free use of their power to control production if 
allowed to do so. That they have exercised this 
power would seem to be amply attested by the 
agreement entered into between the members of 
the Whiskey Trust to limit the production of whis- 
key during a given time, and between the members 
of the Standard Oil Trust to limit the production 
of oil, both of which are frequently cited as in- 
stances of the restriction of production by monop- 
olies. But a more recent example of the exercise 
of this power, and one that has perhaps been more 
directly felt by the people at large and with which 
they are therefore more familiar, is the restriction 
of the production of coal by the Anthracite Coal 
Combination. There has long been a well founded 
conviction in the minds of the people that the sell- 



Trusts and Monopolies. 49 

ing price of coal has been arbitrarily fixed by this 
combination regardless of the cost of production; 
but perhaps a more clearly defined understanding 
of the situation, and at the same time a more au- 
thoritative statement of the conditions as they 
really exist, may be found in the testimony given 
before the United States Industrial Commission : A 
commission established by Congress in 1898 to in- 
quire into, and to report upon, industrial combina- 
tions and their effects upon capital, agriculture 
and labor. 

Mr. John Mitchell, President of the United 
Mine Workers of America, testifying before the In- 
dustrial Commission, July, 1901, declares: "The 
anthracite coal railroads and mines are being rap- 
idly concentrated in the hands of a few companies. 
Ninety per cent, of the coal is already owned by 
seven railroads, and this is fully fifteen per cent, 
more than they owned before the strike of 1900. 
Many of the largest independent companies have 
recently sold out to the railroads and the witness 
believes that soon the railroads, financed by the 
Morgan interests, will own absolutely all of the 
anthracite coal." 

Mr. Benjamin James, testifying in April, 1899, 
says : "The prices of anthracite coal are now being 
regulated, and the amount of the output for each 
year and for each mine is limited, by the Anthra- 
cite Coal Operators' Association." 

It is equally apparent that a combination or 
monopoly which has the power to control the quan- 
tity of a given commodity which shall be produced 
for the market, may also, in a large measure at 
least, regulate the quality of that commodity. 



5o Combinations, 

This was early recognized as being one of the 
evils which would result from the establishment of 
a monopoly, and the experience of the people 
during the reign of monopolies which held sway 
for a considerable time during the reign of Queen 
Elizabeth of England, and which is very vividly 
and forcibly described in Mr. Hume's "History of 
England/' would seem to have established the grav- 
ity of this evil beyond a doubt, for we find it laid 
down in the case of Darcy versus Allein, reported 
by Lord Coke, which was decided in the English 
courts in the last year of the reign of Queen Eliza- 
beth, just three hundred years ago, as being one 
of the three chief evils of monopoly. These evils 
are there enumerated, in brief, as follows: "First, 
that the price of the same commodity will be raised, 
for he who has the sole selling of any commodity 
may well make the price as he pleases. Second, 
the incident to a monopoly is that after the mo- 
nopoly is granted, the commodity is not so good 
and merchantable as it was before; for the pat- 
entee, having the sole trade, regards only his pri- 
vate benefit, and not the common wealth. Third, 
it tends to the impoverishment of divers artificers 
and others who before, by the labor of their hands 
in their art or trade, had maintained themselves 
and their families, who will now of necessity be 
constrained to live in idleness and beggary." 

It is not so easy to point to well-established in- 
stances of the abuse of the power of monopolies to 
regulate the quality of their products as in the con- 
trol of their quantity, for the production of infe- 
rior goods always partakes of the nature of a fraud 
upon the public and is therefore more difficult to 



Trusts and Monopolies. 51 

prove beyond dispute; but in the case of public 
service monopolies, such as railways, telegraph, 
telephone, gas and electric light plants, street rail- 
ways, water works, etc., it is a matter of general 
knowledge that the service rendered in localities in 
which they have an absolute monopoly is often very 
inferior to that which is provided at points where 
competition is active. 

It is undoubtedly true that the same care is not 
so likely to be taken to preserve the excellence of 
the goods manufactured in cases in which a com- 
plete monopoly has been established, and that the 
same stimulus to improve the quality of their 
products which impels competitors to adopt the 
latest and most improved methods and appliances, 
would in a large measure be lost. On the other 
hand, it is equally true that the necessity for striv- 
ing to undersell competitors, which is the chief 
incentive to adulteration and the production of 
inferior products, is removed ; and, having control 
of the market, it is in a position to command its 
own prices, and should, therefore, be more willing 
and able to produce a good grade of goods. We 
already have state and national statutes regulating 
and prohibiting the adulteration of food and other 
products, and it would seem that, with perhaps 
some extension of their scope, a thorough appli- 
cation of the provisions of these statutes might 
do much to minimize the evil effects of the exercise 
of this power by combinations. 

Possessing the power to regulate production and 
to restrict or expand the supply of a commodity, 
monopoly can, therefore, control prices; for price, 
meaning as it does, the amount which the public 



52 Combinations, 

is willing to pay for a given article at a given 
time, is always governed by the available supply 
of the article in the market, and the number of 
persons who desire to purchase it; and whoever, 
therefore, can control either the supply or the de- 
mand, can fix the price. 

This power, as we have just seen in the case re- 
ported by Lord Coke, was also early recognized 
as being one of the chief powers for evil which 
pertained to monopoly, and the three hundred 
years which have since elapsed have merely served 
to confirm the truth of the position then taken 
by the English courts, and to multiply examples 
of the exercise of the power of monopolies. 

Other monopolies which do not enjoy the excep- 
tional advantages possessed by the coal combina- 
tion, owning directly the means of transpor- 
tation as well as a controlling percentage 
of the coal to be transported, have also 
resorted to the expedient of reducing prices 
in order to cripple or destroy competition. 
These in many instances have formed alliances 
with the railway companies serving substan- 
tially the same purposes as owning them out- 
right, while others rely upon their great financial 
resources to enable them to outlast and to ruin 
their competitors. A most remarkable instance of 
the extent to which these alliances between great 
corporations and the railroads have been carried, 
is presented by the agreement entered into be- 
tween the Standard Oil people and the railroads, 
which was brought out in a congressional investi- 
gation in 1872. By this contract the railroads not 
only undertook to charge the independent refiners 



Trusts and Monopolies. 53 

double the rates charged the Standard Oil people 
for the transportation of their oil, but agreed to 
pay over the amount so collected in excess of the 
regular rates to the Standard Oil people. 

The contest between the Standard Oil Trust and 
the independent refiners affords one of the best 
known examples of the efforts of a would-be mo- 
nopoly to destroy competition by reducing prices, 
and it is very nicely described by Mr. Byron W» 
Holt in an article in the "American Monthly Be- 
view of Keviews" for June, 1899, as follows: "Un- 
able to obtain fair treatment from railroads, the 
independent refiners in 1878 and 1879, with a cap- 
ital of five million dollars, constructed the Tide- 
water Pipe Line Company. Immediately the rail- 
roads reduced their rates on oil from $1 per barrel 
to 80 cents, to 30 cents, to 10 cents, and at last, as 
the general freight agent of one of the roads 
stated, to a rate that would not pay for wheel 
grease. The Tidewater Pipe Line Company sur- 
vived the many attacks until 1883, when it was 
gobbled up by the trust/ 5 Another familiar in- 
stance of this method of enforcing the dictation 
of large concerns upon the smaller ones is found 
in the frequent rate w T ars between competing rail- 
way lines. 

Having thus established the ability of monopo- 
lies to so reduce prices as to compel obedience to 
their dictation by those of their competitors who 
are permitted to remain in the business, it re- 
quires no further discussion to show that, having 
/secured control of the market, it may advance 
^prices sufficiently high, at least, to yield excessive 
profits to itself, and to unduly oppress the con* 



54 Combinations, 

sumer. The Standard Oil Trust again affords 
ns an example of the exercise of this power, for 
after maintaining ruinous prices until it secured 
control of the market, it then raised prices to such 
an extent as to yield profits ranging from twelve 
per cent, per annum in 1894, to forty-eight per 
cent, per annum in 1901, as shown by the table 
of the earnings of that company printed in an- 
other chapter. It may be that there is a point be- 
yond which prices cannot be raised without at- 
tracting new competitors into the business, but 
the experience of the Standard Oil Trust proves 
that millions of dollars of unearned profits may 
be collected from the people before this remedy 
can prove effective in checking the power of the 
monopolist. 

The theory has been advanced by one of the best 
known economists of our day that there is always 
a certain price in every business which may be 
designated the monopoly price, at which the great- 
est number of persons are able and willing to pur- 
chase, and at which the fixed charges will be 
smallest in proportion to the amount of sales, and 
which, therefore, yields the largest possible net 
profit to the producer; that if prices are raised 
above this point, the sales will diminish more 
rapidly than the profits will be increased by the 
higher prices charged; while if prices be reduced 
below that point, the increase in the sales will not 
be sufficient to counteract the proportionate in- 
crease in the fixed charges, and that if combina- 
tions are left to themselves, they will eventually' 
fix prices at this point of greatest return. Tables 
have been prepared with much care to illustrate 



Trusts and Monopolies. 55 

the natural law of gravitation of prices to this 
point of equilibrium, but it appears that indus- 
trial combinations had not yet sufficiently devel- 
oped to afford the writer practical examples of the 
application of his theory, and natural monopolies 
such as street car companies, etc., which had long 
enjoyed monopolistic privileges, appear to be the 
only instance in which we might reasonably ex- 
pect to see the principle exemplified. 

It may be true that there is such an ideal 
price to be found in business if those engaged 
could be induced to seek for it, and to be content 
with it when found, but it is also true that cor- 
porations as well as individuals will ever be found 
reluctant to reduce prices which have once been 
established, in the belief that by sacrificing present 
profits they may hope to secure larger returns in 
the future; and if the public is to be protected 
from excessive overcharges by monopolies, which 
according to many authorities amounts to 66 2-3 
per cent, in the case of street car fare, some more 
powerful influence than the mere automatic work- 
ing of an economic principle must be invoked 
to arrest the hand of greed. 

The power of monopolies to control prices hav- 
ing now, we believe, been made sufficiently ap- 
parent, let us inquire what use are they likely to 
make of it. The Standard Oil Trust, the Sugar 
Trust, the Anthracite Coal Combination, and the 
Whiskey Trust, are about the only important 
members of their class that have been in operation 
long enough to afford much of a foundation for 
judgment as to what the effect of combination 
on prices really has been. They, being the pioneers 



$6 Combinations, 

in the combination movement, have been so 
fiercely assailed by the courts, by the press, by 
public sentiment, by politicians, and by competi- 
tors; have existed under so many varying condi- 
tions, and been obliged to change their form of 
organization so many times, that it is doubtful 
"whether their effect upon prices during the past 
fifteen or twenty years will afford any true clue 
to what their effect will be during the next fifteen 
years under the new and seemingly almost unas- 
sailable form of organization, and that with a 
host of allies in a field which appears to be nearly 
cleared of all effective opposition. Numerous 
tables showing the prices of oil, sugar, and whis- 
key, at frequent intervals during the last fifteen 
or twenty years, have been prepared and published, 
but they fail to afford any convincing evidence of 
the effect of combination on prices. The general 
conclusion derived from an examination of these 
tables appears to be that prices have been a little 
[higher during the periods in which the trusts 
were more nearly in complete control of the mar- 
ket than they were at other times. We find, 
however, nothing in them that would seem to war- 
rant us in drawing any definite conclusions, or 
which would be of any material service to us in 
pursuing our investigation of the subject. 

We believe that the only true key to the correct 
understanding of the purpose and ultimate ef- 
fects of combinations and monopolies is to be 
found in the study of the nature of the organiza- 
tions, and of the character of the individuals who 
compose them. The men who organize and con- 
trol these large monopolistic corporations are men 



Trusts and Monopolies. 57 

•who have devoted their lives to the acquisition of 
wealth and whose experience and training have all 
been calculated to fit them to drive the shrewdest 
bargains, and to secure the largest possible profit 
upon every dollar invested. Their sole purpose in 
organizing these corporations is to secure greater 
profits than they can hope to secure through their 
individual efforts. 

Every individual, no matter how engrossed he 
may be in the strife for gain, is more or less in- 
fluenced by feelings of social and moral obligation 
and restraint, and is liable at times to be swerved 
from the strict path of profit seeking and led to 
yield a point to considerations of charity or hu- 
manity, but not so with a corporation. Its officers 
feel no moral responsibility for the acts which they 
perform in the name of the corporation; they are 
limited in powers and responsibilities, and distress 
may plead in vain for mercy to the average cor- 
poration official, only to be informed that the rules 
of the corporation will not permit him to grant the 
relief sought; and the larger and more powerful 
a corporation grows, the less sentimental it be- 
comes. Profit is its purpose, the statute book its 
conscience, and it knows no higher law or -motive. 

It is frequently claimed by the friends of com- 
bination that its purpose is not to raise prices but 
merely to steady them and to do away with ruinous 
competition. But if, as seems to be the case, by 
steadying prices they mean to preserve any given 
set of rates and to prevent the gradual reduction 
in prices which should naturally follow the con- 
tinual improvements which are being made in 
the methods of production and manufacture, it 



58 Combinations, 

is virtually the same as if they had openly avowed 
their purpose of raising prices. 

Such being the purpose of its creation, having 
such skillful talent to direct it, and enjoying such 
freedom from moral or human restraint, what use 
can we reasonably expect a monopolistic corpora- 
tion to make of its powers except to secure the 
largest possible profits for itself? It is dictated 
fcy the natural instincts of human nature; it 
was practiced with relentless severity centuries ago 
when monopolies controlled the industries of Eng- 
land; the general course of prices of all articles 
which have been largely controlled by trusts dur- 
ing recent years, coupled with the stubborn resist- 
ance with which trusts and monopolies have met 
every effort to limit their power, sufficiently indi- 
cates that such has been the purpose of the trusts 
of recent years ; the prevailing high prices of arti- 
cles controlled by combinations at the present time 
make it clear that there is no disposition on the 
part of the monopolies of to-day to give the public 
the benefit of the increased facilities for production 
and distribution, and there appears to be nothing 
to indicate that the same purpose will not continue 
to be the prevailing policy of the monopolistic 
corporations of the future. 

We here present a section of a number of tables 
prepared by Professor Jenks for the Department 
of Labor of the United States, and published in 
the Bulletin Department of Labor No. 29, July, 
1900, showing the monthly prices of a number of 
the leading articles controlled by combination for 
the years 1897, 1898 and 1899. We have merely 
reproduced the last three years of the tables be- 



Trusts and Monopolies. 59 

lieving that this is a sufficient length of time to 
afford a general idea of the range of prices. It 
will also be seen, from the notes accompanying the 
tables, that many of the combinations referred to 
were organized some years prior to the period 
covered by the . tables, while others were formed 
during that time, thus enabling the reader to note 
the effect upon prices of the transition from com- 
petition to combination, and to compare the fluctu- 
ation in the prices thus effected with that of the 
price of articles controlled by combinations which 
had been long established or which had not yet 
been subjected to such control. 

We are told that the great advance in the price 
of many of the articles shown in these tables can- 
not be wholly charged to the effect of combination, 
and that much of it is due to the increased cost of 
raw materials, but we wish to call attention to the 
fact that, particularly in the iron and steel indus- 
tries, the raw materials are largely controlled by 
the same combinations that control the finished 
products, and that whether the increased cost is 
due to the one or the other, it all goes into the 
same treasury, and amounts to the same thing in 
the end. And, while some portion of this enhanced 
price may doubtless be due to a normal increase 
in value of all kinds of property, there can be no 
reasonable doubt that a large part of the enormous 
increase in prices, which resulted immediately upon 
organization of the combinations controlling the 
production of iron and steel and their products, 
must be directly due to the power of combination ; 
also that in the absence of special circumstances, 
it would seem that any general increase in prices 



6o Combinations, 

that might be due to improved business conditions 
would be pretty generally reflected all along the 
line, and that any very considerable increase in 
prices in excess of this general average might be 
fairly charged to combinations if they have ac- 
quired control of the product. 



Trusts and Monopolies. 



6 il 



MONTHLY PRICES OF CORN MEAL, OATMEAL, ETC.j 

AND THE MATERIALS ENTERING INTO THEIR 

MANUFACTURE, 1897 TO 1899. 

(The combination manufacturing a large quantity of 
these products was organized in June, 1891.) 



Products. 



Mate- 



Corn 
Year and month. meal, 

white, 
per 196 

pounds. 
1897. 

January $1.95 

February 1.60 

March 1.60 

April 1.60 

May 1.70 

June 1.70 

July 1.70 

August 1.95 

September 2.00 

October 2.00 

November 1.85 

December 1.85 

1898. 

January 1.85 

February 1.85 

March 1.95 

April 1.95 

May 1.95 

June 2.05 

July 2.05 

August 2.15 

September 2.00 

October 2.00 

November 2.00 

December 2.00 

1899. 

January 2.05 

February 2.05 

March 2.15 

April 2.15 

May 2.05 

June 2.15 

July 2.15 

August 2.15 

September 2.10 

October 2.10 

November 2.10 

December 2.10 



rial. 
Corn, 
No. 2, 



Products. 



Corn 

meal, No. 2, Oat- 
yellow, cash, per meal 
per 196 bushel. * 
pounds. 



Rolled 
oats 
per 200 per 180 
pounds, pounds. 



$1.65 
1.45 
1.40 
1.40 
1.45 
1.45 
1.40 
1.60 
1.85 
1.80 
1.70 
1.70 



1.70 
1.65 
1.75 
1.75 
1.80 
2.00 
1.75 
1.80 
1.70 
1.70 
1.70 
1.95 



2.00 
2.00 
2.10 
2.10 
1.80 
2.10 
2.10 
2.10 
2.10 
2.10 
2.05 
2.05 



$0.2256 
.2250 
.2375 
.2419 
.2425 
.2444 
.2644 
.2937 
.2962 
.2650 
.2669 
.2625 



.2713 
.2894 
.2894 
.3206 
.3469 
.3362 
.3362 
.3175 
.3025 
.3081 
.3306 
.3556 



.3668 
.3525 
.3456 
.3462 
.3344 
.3438 
.3294 
.3175 
.3313 
.3200 
.3200 
.3075 



$4.25 
3.65 
3.40 
3.40 
3.30 
3.20 
3.20 
3.40 
4.40 
3.40 
3.40 
3.40 



3.60 
3.75 
3.90 
4.00 
4.20 
4.10 
3.90 
3.70 
3.70 
3.00 
3.60 
3.70 



3.70 
3.90 
4.15 
3.90 
3.85 
3.80 
3.90 
3.90 
4.00 
4.55 
4.65 
4.30 



$3.50 
3.25 
3.00 
2.90 
2.90 
2.75 
2.75 
3.00 
4.00 
3.00 
3.00 
3.00 



3.25 

3.35 
3.50 
3.60 
3.85 
3.70 
3.50 
3.30 
3.25 
3.20 
3.20 
3.30 



3.30 
3.50 
3.65 
3.45 
3.45 
3.40 
3.40 
3.40 
3.60 
4.15 
4.25 
3.90 



62 



Combinations, 



MONTHLY PRICES OF CORN MEAL, OATMEAL, ETC. 



Material — 
oats, 
Year and month. No. 2, 

cash, per 
bushel. 
1897. 

January $0.16 3-8 

February 16 1-8 

March 16 1-2 

April 17 1-8 

May 17 2-3 

June 18 1-8 

July 17 1-2 

August 18 1-6 

September 19 4-5 

October 18 3-4 

November 20 7-8 

December 22 2-5 



Product — 


Material — 


pearl 


barley, 


barley, 


No. 3, 


per 


per 


pound. 


bushel. 


$0.01 3-8 


.2940 


.01 3-10 


.2859 


.01 1-4 


.2813 


.01 1-8 


.2925 


.01 1-8 


.2987 


.01 1-8 


.2988 


.01 1-7 


.3090 


.01 1-4 


.3245 


.01 2-5 


.3813 


.01 3-8 


.3518 


.015-8 


.3919 


.01 1-2 


.3555 



1898. 

January 22 3-4 

February 25 1-2 

March 25 4-5 

April 28 2-5 

May 29 

June 23 3-4 

July 23 3-8 

August 21 3-8 

September 21 3-10 

October 23 1-4 

November 26 

December 26 7-8 



.01 1-2 
.01 3-8 
.01 2-5 
.01 1-2 
.01 5-8 
.01 3-4 
.01 5-8 
.01 1-2 
.01 5-8 
.01 3-4 
.01 7-8 
.02 



.3238 
.3387 
.3737 
.4125 
.4675 
.3575 
.3310 
,3687 
.3660 
.3850 
.4313 
.4520 



1899. 

January . .*. 27 

February 27 

March 26 

April 26 

May 25 

June 25 

July 23 

August 20 

September 22 

October 22 

November 23 

December 22 





.01 9-10 


.4656 


3-5 


.01 9-10 


.4581 


1-2 


.01 9-10 


.4485 


4-5 


.01 3-4 


.4412 


7-12 


.01 3-4 


.3912 


1-4 


.01 3-4 


.3817 


3-4 


.01 3-4 


.3910 


3-5 


.01 3-4 


.3713 


1-8 


.01 5-8 


.4005 


3-4 


.02 1-10 


.4162 


1-4 


.02 1-4 


.401$ 


3-5 


.02 1-4 


.3890 



Trusts and Monopolies. . 63 

MONTHLY PRICES OF WHEAT AND RYE FLOUR, AND 

THE MATERIALS ENTERING INTO THEIR 

MANUFACTURE, 1897 TO 1899. 

(The combination manufacturing a large quantity of 
these products was organized in June, 1891.) 



Flour, 
spring 
Year and month. wheat, pat- 

ent process, 
per barrel. 
1897. 

January $4.27 

February 4.13 

March 4.05 

April 3.98 

May 4.09 

June 3.85 

July . 3.93 

August 4.65 

September 5.28 

October 4.89 

November 4.75 

December 4.61 

1898. 

January 4.59 

February . 4.84 

March 4.89 

April 5.12 

May 6.66 

June 5.19 

July 4.48 

August 4.17 

September 3.53 

October 3.49 

November 3.48 

December 3.37 

1899. 

January 3.46 

February 3.55 

March 3.47 

April 3.45 

May . 3.52 

June 3.60 

July : 3.52 

August 3.50 

September 3.55 

October 3.55 

November 4 3.42 

December 3.38 



Products. 




Flour, 


Flour, 


good spring 


medium to 


supers 


choice win- 


low grade, 


ter wheat, 


per barrel. 


per barrel, 


$1.70 


$4.32 


1.57 


4.15 


1.48 


4.10 


1.47 


4.09 


1.47 


4.44 


1.44 


4.05 


1.44 


4.96 


1.74 


4.33 


2.00 


4.78 


1.96 


4.68 


1.78 


4.44 


1.75 


4.30 


1.67 


4.33 


1.77 


4.45 


1.95 


4.40 


2.04 


4.49 


2.56 


6.15 


2.12 


4.90 


1.62 


3.96 


1.52 


3.36 


1.50 


3.11 


1.55 


3.14 


1.65 


3.15 


1.65 


3.20 


1.68 


3.40> 


1.65 


3J50* 


1.52 


3.30 


1.48 


3.19^ 


1.50 


3.22 


1.58 


3.30 


1.57 


3.22: 


1.52 


3.16, 


1.53 


3.21 


1.62 


3.29 


3.42 


3.20 


1.52 


3.10 



64 Combinations, 

MONTHLY PRICES OF WHEAT AND RYE FLOUR. 



Material — 
wheat, No. 2, 
Year and month. cash, 

per bush. 

1897. 

January $0.77 

February 74 1-2 

March 73 1-2 

April 72 

May 72 1-4 

June 70 

July 73 1-4 

August 88 

September 92 1-2 

October 90 

November ...... .92 1-4 

December 96 



1898. 

January 99 1-2 

February 1.01 1-2 

March 1.03 1-4 

April 1.12 1-4 

May 1.51 

June 97 1-2 

July 76 4-5 

August 70 1-4 

September 65 1-4 

October . .66 1-12 

November 67 

December 66 1-4 



1899. 

January 71 1-4 

February 72 1-12 

March 70 1-4 

April 73 1-4 

May 73 9-10 

June 75 1-4 

July 72 

August 71 3-4 

September 72 1-4 

October 71 5-12 

November 68 1-4 

December 66 3-4 



Produ 


ct— 


Material- 


rye flour, 


rye, No. 2, 


good to 


in store, 


choice, 


per bush. 


per barrel. 




$2.65 




$0.3708 


2.31 


1-4 


.3390 


2.22 


1-2 


.3337 


2.22 


1-2 


.3310 


2.30 




.3425 


2.18 




.3337 


2.23 




.3627 


2.55 




.4600 


3.30 




.4987 


2.94 


1-2 


.4608 


2.97 


1-2 


.4747 


2.82 


1-2 


.4640 


2.70 




.4525 


2.80 




.4853 


2.75 




.4931 


2.96 


1-2 


.5320 


3.78 


3-4 


.6624 


2.96 


1-4 


.4487 


2.60 




.4555 


2.51 


1-4 


.4378 


2.43 




.4543 


2.64 




.4916 


2.78 


3-4 


.5131 


2.85 




.5375. 


2.97 


1-2 


.5594 


3.00 




.5577 


2.79 




.5387 


2.80 




.5565 


2.88 




.6012 


2.91 


1-2 


.5927 


2.82 


1-2 


.5504 


2.63 




.5343 


2.79 




.5595 


2.91 




.5568 


2.83 




.5247 


2.79 




.5043 



Trusts and Monopolies. 



65 



MONTHLY PRICES OF CRACKERS AND THE MATE- 
RIALS ENTERING INTO THEIR MANU- 
FACTURE, 1897 to 1899. 

(The combination controlling 60 per cent, of these prod- 
ucts was organized in February, 1898.) 

Products. 

Soda 
crackers, 
Year and month. XXX, per 
pound. 

1897. 

January $0.06 

February 05% 

March 05% 

April 05% 

May 05% 

June 05% 

July 05 % 

August 05 y 3 

September 05% 

October 05% 

November 05 % 

December 06 

1898. 

January ..'. i.. .06% 

February 06% 

March 06% 

April 06% 

May 07 

June 07% 

July 06% 

August 06% 

September 06% 

October 06% 

November 06 

December 06 

1899. 

January 06 

February 06 

March 06 

April 06 

May 06 

June 06 

July 06 

August 06 

September 06 

October 06% 

November 06 % 

December 06% 



Soda 


Ginger 


crackers, 


snaps, 


standard, 


XXX, per 


per 


pound. 


pound. 




$0.06 


$0.08 


.05% 


.07 


.05% 


.07 


.05% 


.07 


.05% 


.07 


.05% 


.07 


.05% 


.07 


.05% 


.07 


.05% 


.07 


.05% 


.07 


.05% 


.07 


.06 


.08 


.06% 


.08 


.06% 


.08% 


.06% 


.08% 


.06% 


.08 


.07 


.08 


.07 


.08% 


.06% 


.07% 


.06% 


.07% 


.06% 


.07% 


.06 


.07% 


.06 


.07% 


.06 


.07% 


.06 


.07% 


.06 


•07% 


.06 


.07% 


.06 


.07% 


.06 


•07% 


.06 


.07% 


.06 


.07% 


.06 


.07% 


.06 


.07% 


.06 


.07% 


.06 


.07% 


.06 


.07% 



66 Combinations, 

MONTHLY PRICES OF CRACKERS. 



Year and month. 



Flour, 
spring 
wheat, 
patent 
process, 
per bar- 
rel. 



1897. 

January $4.27 

February 4.13 

March 4.05 

April 3.98 

May 4.09 

June 3.85 

July 3.93 

August 4.65 

September 5.28 

October 4.8 ) 

November 4.75 

December 4.61 

1898. 

January 4.59 

February 4.84 

March 4.89 

April 5.12 

May 6.66 

June 5.19 

July 4.48 

August 4.17 

September 3.53 

October 3.49 

November 3.48 

December 3.37 

1899. 

January 3.46 

February 3.55 

March 3.47 

April 3.45 

May 3.52 

June 3.60 

July 3.52 

August 3.50 

September 3.55 

October 3.55 

November 3.42 

December 3.38 



Materials. 
Flour, 
good 
spring su- 
pers, iow 

grade, 
per bar- 
rel. 



$1.70 
1.57 
1.48 
1.47 
1.47 
1.44 
1.44 
1.74 
2.00 
1.96 
1.78 
1.75 



1.67 
1.77 
1.95 
2.04 
2.56 
2.12 
1.62 
1.52 
1.50 
1.55 
1.65 
1.65 



1.68 
1.65 
1.52 
1.48 
1.50 
1.58 
1.57 
1.52 
1.53 
1.32 
1.60 
1.52 



Flour, 
medium 
to choice 
winter 
wheat, 
per bar- 
rel. 



$4.32 
4.15 
4.10 
4.09 
4.44 
4.05 
3.96 
4.33 
4.78 
4.68 
4.44 
4.30 



4.33 
4.45 
4.40 
4.49 
6.15 
4.90 
3.96 
3.36 
3.11 
3.14 
3.15 
3.20 



3.40 
3.50 
3.30 
3.19 
3.22 
3.30 
3.22 
3.16 
3.21 
3.29 
3.20 
3.10 



Lard, 

steam 

refined, 

per 100 

pounds* 



$3.90 
3.85 
4.13 
4.17 
3.92 
3.60 
4.05 
4.47 
4.61 
4.37 
4.23 
4.33 



4.72 
5.02 
5.19 
5.28 
6.23 
5.87 
5.46 
5.20 
4.91 
4.89 
4.93 
5.20 



5.59 
5.54 
5.28 
5.21 
5.09 
4.98 
5.?4 
5.19 
5.21 
5.41 
5.08 
5.26 



Trusts and Monopolies. 



6 7 



MONTHLY PRICES OF ONE LEADING BRAND EACH OF 
CHEROOTS, CIGARETTES, AND SMOKING TO- 
BACCO, AND THE MATERIALS ENTERING 
INTO THE MANUFACTURE OF EACH, 



(The 


combinatio 


q controlling tb 


e greater 


proportion of 


these products was 


organized in 1890.) 








Cheroots. 




Cigarettes. Smoking 


tobacco. 




r+rt-M 
P <V> ►* 


&§ 


p CD £ 


ZZ 


P (t M| 


£g 




H 2 O 


CO & 


X fl ft 


CP 


M 2 O 


CP 


Year 


-go, 
tjEg 

ft £ 


ft t-i 


iduct 
nal 

:, pei 


©p 


- P ft, 

Sic 

13 ~n 

ft rt- 




and 


«»l 


13 >- 

2 1 


l-A>-S 1 


*s 1 


".1 


13 , 


month. 


less i 
even' 
,000. 


* ft 


less i 
even 
,000. 


n \ 

r? ft 


CgOQ 


sl 


1897. 


5 & 
1 


P 

l-to 


<X> 1 


• P 


P^? 


• P 


Jan.. . . 


.$9.25 $0.1328 


$2.92 


$0.1089 


$0.20 


$0.0313 


Feb. . . . 


. 9.25 


.1384 


2.92 


.1083 


.20 


.0316 


March . 


. 9.25 


.1317 


2.92 


.1077 


.20 


.0317 


April . . 
May . . . 


. 9.25 


.1211 


3.30 


.1071 


.20 


.0317 


. 9.12V2 


.1206 


2.92 


.1053 


.20 


.0318- 


June . . 


. 9.00 


.1211 


2.92 


.1058 


.20 


.0317 


July .. 


.. 9.00 


.1200 


2.96 


.1057 


.20 


.0317 


Aug. . . . 


. 9.00 


.1177 


2.71 


.1015 


.20 


.0317 


Sept . . 


. 9.00 


.1239 


2.42 


.1034 


.20 


.0352 


Oct .... 


. 9.00 


.1222 


2.42 


.1052 


.20 


.038G 


Nov. . . 


. 9.00 


.1228 


2.42 


.1058 


.20 


.0414 


Dec . . . 


. 9.00 


.1272 


2.50 


.1063 


.20 


.0425 


1898. 














Jan . . . 


. 9.00 


.1339 


2.70 


.1064 


.20 


.0431 


Feb. . . 


. 9.00 


.1288 


2.70 


.1063 


.20 


.0438 


March . 


. 9.00 


.1299 


2.70 


.1063 


.20 


.0448 


April . 


. 9.00 


.1322 


2.70 


.1062 


.20 


.0459 


May . . 


.. 9.00 


.1328 


2.70 


.1061 


.20 


.046G 


June . 


. 8.32% 


.1333 


2.45 


.1061 


.20 


.0470 


July .. 


.. 7.65 


.1305 


2.20 


.1062 


.22 


.0473 


Aug. . . 


.. 7.65 


.1333 


2.20 


.1061 


.22 


.0472 


Sept. . 


. 7.65 


.1378 


2.20 


.1055 


.22 


.0508 


Oct ... 


. 7.65 


.1395 


2.20 


.1043 


.22 


.0502 


Nov. . . 


. 7.65 


.1488 


2.20 


.1040 


.22 


.0498 


Dec. . . 


.. 7.65 


.1538 


2.20 


.1047 


.22 


.0498 


1899. 














Jan. . . 


. . 7.65 


.1428 


2.20 


.1051 


.22 


.0498 


Feb. . . 


. . 7.65 


.1417 


2.20 


.1052 


.22 


.0498 


March 


. . 7.65 


.1217 


2.20 


.1053 


.22 


.0496 


April . 


. . 7.65 


.1367 


2.20 


.1053 


.22 


.0495 


May . . 


.. 7.65 


.1244 


2.20 


.1053 


.22 


.0495 


June . . 


. . 7.65 


.1177 


2.20 


.1054 


.22 


.0495 


July .. 


.. 7.65 


.1200 


2.20 


.1054 


.23 


.0496 


Aug. . . 


. . 7.65 


.1317 


2.20 


.1054 


.23 


.04r*6 


Sept. . 


. . 7.65 


.1277 


2.20 


.1026 


.23 


.0532 


Oct. . . 


. . 7.65 


.1350 


2.20 


.1032 


.23 


.0536 


Nov. . . 


.. 7.65 


.1362 


2.20 


.1023 


.23 


.0542 


Dec . . 


. . 7.65 


.1516 


2.20 


.1024 


.23 


.0544 



68 



Combinations, 



MONTHLY PRICES OF LAGER BEER AND THE MATE- 
RIALS ENTERING INTO ITS MANUFACTURE. 

(The combination manufacturing a large quantity of this 
product was organized in August, 1898.) 



Product. 

2*3 



Year 

and 

month. 



1897. 

Jan $5.00 

Feb 5,00 

March 5.00 

April 5.00 

May 5.00 

June 5.00 

July 5.00 

Aug 5.00 

Sept 5.00 

Oct 5.00 

Nov. 5.00 

Dec 5.00 

1898. 

Jan 6.00 

Feb 0.00 

March 6.00 

April 6.00 

May 6.00 

June 6.00 

July 6.00 

Aug 6.00 

Sept 6.00 

Oct 6.00 

Nov 6.00 

Dec 5.00 

1899. 

Jan 5.00 

Feb 5.00 

March 5.00 

April 5.00 

May 5.00 

June 5.00 

July 5.00 

Aug . 5.00 

Sept 5.00 

Oct 5.00 

Nov 5.00 

Dec 5.00 



^2M 

1^ 

tr 

«a 

>■* (0 

$0.14 
.13 
.12 
.10 
.10 
.07 
.09 
.08 
.10 
.18 
.18 
.18 

.18 
.19 
.18 
.17 
.16 
.14 
.12 
.12 



.19 
.19 

.18 
.17 
.17 
.16 
.16 
.16 
.16 
.15 
.12 
.14 
.13 
.13 












Materials. 

SffM 
Fftg 

O « 



pf* "oo, 



•o B 



MO 
.10 
.08 
.07 
.06 

.06 
.06 
.05 
.07 
.12 
.12 

.12 
.15 
.14 
.13 
.12 
.10 
.09 
.09 
.07 

.15 
.15 

.12 
.10 
.12 
.10 
.10 
.12 

.11 
.10 
.10 
.10 
.09 



3 

S op 

&(p & 

$0.14 
.14 
.13 
.12 
.12 

.12 
.12 
.09 
.12 
.17 
.18 

.18 
.17 
.16 
.16 
.14 
.13 



.10 
.10 

.19 
.19 

.18 
.18 
.18 

.18 
.18 
.18 

.18 
.15 
.14 
.13 
.12 



^2 
o 



CTfcO 



$0.2256 
.2250 
.2375 
.2419 
.2425 
.2444 
.2644 
.2937 
.2962 
.2650 
.2669 
.2625 

.2713 

.2894 
.2894 
.3206 
.3469 
.3237 
.3362 
.3175 
.3025 
.3081 
.3306 
.3556 

.3668 
.3525 
.3456 
.3462 
.3344 
.3438 
.3294 
.3175 
.3313 
.3200 
.3200 
.3075 



■sw 



' o 



$0.2940 
.2859 
.2813 
.2925 
.2987 
.2988 
.3090 
.3245 
.3813 
.3518 
.3919 
.3555 

.3238 
.3387 
.3737 
.4125 
.4675 
.3575 
.3310 
.3687 
.3660 
.3850 
.4313 
.4520 

.4656 
.4581 
.4485 
.4412 
.3912 
.3817 
.3910 
.3713 
.4005 
.4162 
.4016 
.3890 



Trusts and Monopolies. 69 

MONTHLY PRICES OF PROOF SPIRITS AND THE 

MATERIAL ENTERING INTO ITS MANUFACTURE. 

(The combination controlling a large proportion of this 
product was organized in 1887 ; reorganized 1890, 1895 and 
1899.) 

£^ £ >■< 5 s ° ^E 3 

J^O r>0 CO O "1 JD<pO 

Tear P ~ "S " c"" -g^* 

1 M COM »Q 2.03 SO 

and E °SH 2.^ * ^jl^ 

month. ff off ^ M g- ^S." 

— — © ■"* & ° o ^ 

5 S PB ~ PBB 
1897. 

Jan $1,170 $0,070 $0,328 $0,225 $0,102 

Feb 1.165 .065 .305 .225 .080 

March 1.165 .065 .305 .237 .068 

April 1.182 .082 .385 .242 .143 

May 1.187 .087 .408 .242 .166 

June 1.187 .087 .408 .244 .164 

July 1.187 .087 .408 .264 .144 

Aug 1.192 .092 .432 .294 .138 

Sept 1.203 .103 .483 .296 .187 

Oct 1.187 .087 .408 .265 .143 

Nov 1.184 .084 .394 .267 .127 

Dec 1.182 .082 .385 .262 .123 

1898. 

Jan 1.182 .082 .394 .271 .123 

Feb 1.186 .086 .413 .289 .124 

March 1.192 .092 .442 .289 .153 

April 1.197 .097 .466 .321 .145 

May 1.219 .119 .571 .347 .224 

June 1.224 .124 .595 .324 .271 

July 1.242 .142 .682 .336 .346 

Aug 1.242 .142 .682 .317 .365 

Sept 1.242 .142 .682 .302 .380 

Oct 1.242 .142 .682 .308 .374 

Nov 1.245 .145 .696 .331 .365 

Dec 1.252 .152 .730 .356 .374 

1899. 

Jan 1.247 .147 .689 .367 .322 

Feb 1.240 .140 .656 .352 .304 

March 1.240 .140 .656 .346 .310 

April 1.240 .140 .656 .347 .309 

May 1.240 .140 .656 .334 .322 

June 1.240 .140 .656 .344 .312 

July 1.240 .140 .656 .329 .327 

Aug 1.240 .140 .656 .317 .339 

Sept 1.210 .110 .516 .331 .185 

Oct 1.220 .120 .563 .320 .243 

Nov 1.226 .126 .591 .316 .275 

Dec 1.225 .125 .587 .305 .282 



70 



Combinations, 



MONTHLY PRICES OF REFINED EXPORT OIL AND 

THE MATERIAL ENTERING INTO ITS 

MANUFACTURE, 1897 TO 1899. 

(The combination controlling 82.3 per cent, of this prod- 
uct was organized in 1882.) 

Product — Material — Difference, 

refined ex- crude oil 

Year and month. port oil at at Oil City 

New York, per gallon, 
per gallon. 
1897. 

Jan $0.0613 $0.0210 $0.0403 

Feb 0626 .0215 .0411 

March 0636 .0219 .0417 

April 0613 .0205 .0408 

May 0623 .0206 .0417 

June 0614 .0205 .0409 

July 0587 .0185 .0402 

Aug 0575 .0169 .0406 

Sept 0574 .0166 .0408 

Oct 0555 .0161 .0394 

Nov 0540 .0155 .0385 

Dec 0540 .0155 .0385 

1898. 

Jan 0540 .0150 .0390 

Feb 0550 .0161 .0389 

March 0582 .0187 .0395 

April 0567 .0176 .0391 

May 0601 .0196 .0405 

June 0616 .0207 .0409 

July 0626 .0222 .0404 

Aug 0644 .0232 .0412 

Sept 0663 .0242 .0421 

Oct 0721 .0269 .0452 

Nov 0735 .0277 .0458 

Dec 0742 .0279 .0463 

1899. 

Jan * 0743 .0728 .0465 

Feb 0740 .0274 .0466 

March 0734 .0269 .0465 

April 0705 .0269 .0436 

May 0699 .0269 .0430 

June 0720 .0270 .0450 

July 0761 .0292 .0469 

Aug 0782 .0304 .0478 

Sept 0863 .0344 .0519 

Oct 0900 .0360 .0540 

Nov 0940 .0375 .0565 

Dec 0985 .0413 .0572 



Trusts and Monopolies. 



71 



MONTHLY PRICES OF GRANULATED SUGAR AND 
THE MATERIAL ENTERING INTO ITS MANU- 
FACTURE AT NEW YORK, 1897 TO 1899. 

(The combination controlling a large proportion of this 
product was organized in 1887.) 

Product — Material — ■ 

Year and granulated sugar 96° Difference, 

month. sugar, per centrifugal, 

pound. per pound. 

1897. 

January $0.04052 $0.03180 $0.00872 

February 04070 .03215 .00855 

March 04140 .03248 .00892 

April 04332 .03306 .01026 

May 04260 .03280 .00^80 

June 04410 .03453 .00957 

July 04606 .03600 .01006 

August 04720 .03750 .00970 

September 04803 .03876 .00927 

October 04818 .03843 .00975 

November 04720 .03843 .00877 

December 04840 .04038 .00802 

1898 

January . . . ' 04936 .04132 .00804 

February 04945 .04150 .00795 

March 04865 .04098 .00767 

April 04993 .04156 .00837 

May 05098 .04230 .00868 

June 05080 .04286 .00794 

July 05080 .04125 .00955 

August 05080 .04234 .00846 

September 05172 .04349 .00823 

October 04735 .04238 .00497 

November 04880 .04385 .00495 

December 04846 .04401 .00445 

1899 

January . .' 04711 .04280 .00431 

February 04720 .04326 .003'.i4 

March 04816 .04395 .00421 

April 04930 .04578 .00352 

May 05080 .04656 .00424 

June 05184 .04626 .00558 

July 05210 .04453 .00757 

August 05122 .04524 .00598 

September 04874 .04375 .00499 

October 04795 .04310 .00485 

November 04795 .04265 .00530 

December 04795 .04250 .00545 



72 



Combinations, 



MONTHLY PRICES OF STARCH AND GLUCOSE 
THE MATERIAL ENTERING INTO THEIR 
MANUFACTURE, 1897 TO 1899. 



AND 



(The combination controlling 90 to 95 per cent, of these 
products was organized in August, 1897.) 



Pearl 
[Year and starch, 

month per 100 

lbs. 
1897. 

January $0.84 

February 79 

March 83 

April 85 

May 84 

June 96 

July 1.07 

August 1.41 

September 1.41 

October 1.19 

November 1.05% 

December 1.04% 



1898. 

January 1.01% 

February 1.03 

March 1.18 

April 1.19 

May 1.27 

June 1.36 

July 1.22 

August 1.25 

September 1.38 

October 1.25 

November .... 1.26 

December 1.16 

1899. 

January 1.22 

February 1.22% 

March 1.28 

April 1.231/6 

May 1.23% 

June 1.25 

July 1.31 

August .... 1.29 

September 1.19 

October 1.28 

November 1.36 

December 1.18 



Products. 






Crystal 


Mixing 


Material 


glucose, 


and jelly, 


— corn, 


per 100 


glucose, per 


per bush. 


lbs. 


100 lbs. 




$0.77 


$0.72 


$0.1978 


.74 


.70 


.1851 


.75 


.72 


.1983 


.78 


.72 


.2261 


.80 


.77 


.2348 


.87 


.84 


.2194 


1.04 


1.00 


.2577 


1.75 


1.45 


.2959 


1.75 


1.55 


.2959 


1.75 


1.15 


.2675 


1.50 


1.25 


.2661 


1.52% 


1.30 


.2657 


1.55 


1.30 


.2678 


1.60 


1.30 


.2797 


1.50 


1.15 


.2906 


1.45 


1.15 


.2983 


1.45 


1.15 


.3440 


1.22 


1.08 


.3215 


1.17% 


1.02% 


.3222 


1.20 


1.07 


.3374 


1.22 


1.08% 


.3105 


1.45 


1.11 


.3049 


1.28% 


1.13 


.3278 


1.28 


1.15 


.3262 


1.23 


1.08 


.3335 


1.20 


1.09 


.3384 


1.19 


1.12 


.3241 


1.18 


1.12 


.3362 


1.19% 


1.13 


.3272 


1.29 


1.26 


.3106 


1.28 


1.20% 


.3242 


1.27 


1.20 


.3150 


1.23 


1.15% 


.3144 


1.25 


1.18 


.3197 


1.24 


1.15 


.3162 


1.16 


1.04 


.3090 



Trusts and Monopolies. 73 



MONTHLY PRICES OF AMERICAN TIN" PLATES AND 

THE MATERIALS ENTERING INTO THEIR 

MANUFACTURE, 1897 TO 1899. 

(The combination controlling 95 per cent, of this product 
was organized in 1898.) 



Year 
and 


Product — 
plates, Amer 
Bessemer coke 
20, at New Y 
per 108 lbs. 


^£3 
w 

o - 
w 

^p 


8£g 

oo ~P 

<-t-<T> 
O GC >-* 


H3 

© 

c-t- 

p 

o 

00 


g 

>-* 

cs 

P 


month. 


Ml 


^95 








°~ 5" 


*o2 


£7*00 










^3 


w a I'D 






1897 












Jan 


' $3.40 


$0.3300 


$0.7131 


$1.0431 


$2.3569 


Feb 


3.30 


.3350 


.7258 


1.0608 


2.2392 


March . . . 


3.35 


.3300 


.7352 


1.0652 


2.2848 


April 


3.40 


.3300 


.7352 


1.0652 


2.3348 


May 


3.40 


.3300 


.7371 


1.0671 


2.3329 


June .... 


3.35 


.3400 


.7281 


1.0681 


2.2819 


July 


3.30 


.3450 








Aug 


3.20 


.3450 








Sent 


3.15 


.3400 


.6928 


1.0328 


2.1172 


Oct. ..... 


3.15 


.3400 


.7098 


1.0498 


2.1002 


Nov 


3.15 


.3400 


.6834 


1.0234 


2.1266 


Dec 


3.15 


.3400 


.6509 


0.9909 


2.1591 


1898 












Jan 


3.15 


.3450 


.6561 


1.0011 


2.1489 


Feb. 


3.15 


.3500 


.6603 


1.0103 


2.139T 


March . . . 


3.15 


.3550 


.6594 


1.0144 


2.1356 


April . . . 


3.10 


.3600 


.6613 


1.0213 


2.0787 


May 


3.10 


.3675 


.6669 


1.0344 


2.0656 


June . ... 


3.10 


.3750 


.7102 


1.0852 


2.0148 


July .... 


3.05 


.3850 


.6989 


1.0839 


1.9661 


Aug 


3.00 


.3950 


.6961 


1.0811 


1.9089 


Sept. . . . 


3.00 


.4050 


.6942 


1.0992 


1.9008 


Oct 


2.90 


.4250 


.7022 


1.1272 


1.7728 


Nov 


2.95 


.4500 


.7112 


1.1612 


1.7888 


Dec 


3.10 


.4650 


.6947 


1.1597 


1.9403 


1899 












Jan 


3.34 


.5500 


.7314 


1.2814 


2.0586 


Feb 


3.84 


.5750 


.7055 


1.2805 


2.5595 


March . . . 


4.21i/ a 


.5875 


.6886 


1.2761 


2.9389 


April .... 


4.21 y a 


.6250 


.7649 


1.3899 


2.8251 


May .... 


4.21 y 2 


.6350 


.7192 


1.3542 


2.8608 


June .... 


4.21 V 2 


.6400 


.7107 


1.3507 


2.8643 


July 


4.7iy 2 


.7125 


.8091 


1.5216 


3.1934 


Aug 


5.00 


.7750 


1.2476 


2.0226 


2.9774 


Sept 


5.00 


.7900 


1.2651 


2.0551 


2.9449 


Oct 


5.00 


.7800 


1.5717 


2.3517 


2.6483 


Nov 


5.00 


.7000 


1.5255 


2.2255 


2.7745 


Dec 


5.00 











74 Combinations, 

MONTHLY PRICES OP PIG IRON, STEEL, BILLETS, 

RAILS, ETC., 1897 TO 1899. 
(The combinations controlling the most of these products 
were organized in December, 1898, and the first half of 



1899.) 



** P S3 

Year M -~g, 

and £^ 

month. —5!? 

o to 
1897. 

Jan $11.02 

Feb 11.00 

March 10.88 

April 10.75 

May 10.38 

June 10.25 

July 10.25 

Aug 10.25 

Sept 10.40 

Get 11.00 

Nov 11.00 

Dec 11.00 

1898. 

Jan 11.00 

Feb 10.93 

March 10.75 

April 10.91 

May 11.00 

June 11.00 

July 11.00 

Aug 11.00 

Sept 11.00 

Oct 11.00 

Nov 11.00 

Dec 11.00 

1899. 

Jan 11.12 

Feb 12.12 

March 14.60 

April 15.12 

May 15.37 

June 17.60 

July 19.50 

Aug 20.50 

Sept 23.00 

Oct 23.00 

Nov 23.50 

Dec 23.50 



Pig Iron. 



Charcoal, 
Superior, 
cago per 2 


Gray f 
southern, 
cinnati, p 
lbs. 


Gray fo 
Philadelp 
2,240 lbs. 


s°S8 
B 


Gray for 
ore, at P 
per 2,240 




o o 


CTH 


*~i pa 


h-JS!(W 


bOP 


*i p 


S* * 


rfc 


Crf <° 


HjXrt- 


n-*i 


j° o 




03 03* 


i CD 


** ~- 




tc2 


* D* 




(D P 
■-» <r»- 


Id 3 

©¥ 


5* 


$13.50 


$9.31 


$11.06 


$10.77 


$9.66 


13.50 


9.00 


11.00 


10.72 


9.54 


13.50 


8.94 


10.65 


10.57 


9.41 


13.50 


8.40 


10.50 


9.91 


8.85 


13.00 


8.19 


10.25 


9.52 


8.70 


13.00 


8.25 


10.10 


9.74 


8.36 


13.00 


8.45 


10.19 


9.39 


8.36 


13.00 


8.45 


10.05 


9.54 


8.29 


12.00 


8.80 


10.50 


10.04 


8.85 


12.50 


9.00 


10.50 


10.70 


9.75 


12.50 


9.00 


10.50 


10.52 


9.56 


12.50 


9.00 


10.50 


10.09 


9.00 


12.50 


9.00 


10.37 


10.00 


9.00 


11.50 


8.75 


10.25 


10.06 


8.97 


11.50 


8.55 


10.25 


10.37 


9.06 


11.50 


8.50 


10.25 


10.35 


9.22 


11.50 


8.62 


10.25 


10.41 


9.12 


11.50 


8.55 


10.25 


10.42 


9.14 


11.50 


8.38 


10.25 


10.25 


9.11 


11.50 


8.37 


10.25 


10.35 


9.19 


11.50 


8.55 


10.19 


10.45 


9.36 


11.50 


8.75 


10.00 


10.40 


9.33 


11.50 


8.75 


10.00 


10.22 


9.24 


11.50 


8.90 


10.41 


10.64 


9.46 


11.50 


9.56 


10.75 


11.00 


9.89 


12.50 


10.42 


11.69 


11.69 


10.87 


15.75 


12.70 


14.37 


14.77 


13.29 


17.00 


13.25 


15.00 


15.06 


14.50 


17.25 


13.43 


15.30 


16.32 


15.07 


19.50 


14.85 


16.50 


18.70 


15.94 


21.50 


16.25 


17.81 


20.45 


17.50 


22.50 


17.25 


18.10 


22.37 


18.37 


24.50 


19.00 


19.50 


23.85 


20.90 


25.00 


19.25 


19.65 


24.50 


21.19 


25.50 


19.25 


20.19 


24.69 


21.56 


25.50 


19.12 y a 


20.31 


25.00 


21.52 



Trusts and Monopolies. 75 

MONTHLY PRICES OF STEEL BILLETS, RAILS, ETC. 

Year 5 £ 

and Kg. 

month. J^2 
10 2 

1897. 
January .... $15.42 

February .... 15.25 

March 15.44 

April 14.00 

May 13.82 

June 14.06 

July 14.00 

August 14.00 

September . . 15.60 

October 16.44 

November . . . 15.57 

December .... 15.00 

1898. 

January 14.93 

February .... 15.06 

March 15.25 

April 15.06 

May 14.85 

June 14.65 

July 14.50 

August 15.85 

September . . . 16.00 

October 15.56 

November . . . 15.06 

December .... 15.80 

1899. 

January 16.62 

February 18.00 

March 24.30 

April 25.37 

May 26.75 

June 30.10 

July 33.12 

August 35.62 

September . . . 38.37 

October 33.75 

November . . . 36.50 

December .... 38.75 



02 h- 


Slabs, 
8 in., 
burg, 
lbs. 


Rails 
in Pe 
per 2, 


^ ,-f. 










ux pa a 


4^B 


^m °* 


T GO. 


oa 


0?<<j 


$15.14 


$16.92 


$25.00 


15.41 


16.75 


20.00 


15.61 


16.94 


18.00 


15.61 


16.10 


18.00 


15.65 


15.32 


18.00 


15.46 


15.56 


18.00 




15.50 


18.00 




15.50 


18.00 


14.71 


17.10 


18.00 


15.07 


17.94 


18.00 


14.51 


17.07 


18.00 


13.82 


16.50 


18.00 


13.03 


16.43 


18.00 


14.02 


16.56 


18.00 


14.00 


16.75 


18.00 


14.04 


16.56 


18.00 


14.16 


16.35 


18.00 


15.08 


16.15 


17.50 


14.84 


16.00 


17.00 


14.78 


17.35 


18.00 


14.74 


17.50 


17.50 


14.91 


17.06 


17.50 


15.10 


16.56 


17.00 


14.75 


17.30 


17.50 


15.53 


18.12 


18.50 


14.98 


19.50 


20.25 


14.62 


25.80 


24.80 


16.24 


26.87 


25.75 


15.27 


28.25 


25.20 


15.09 


31.60 


27.25 


17.18 


35.50 


28.25 


26.49 


38.50 


31.00 


26.86 


40.50 


32.50 


33.37 


40.50 


34.00 


32.39 


35.50 


35.00 




34.50 


35.00 



76 Combinations, 

MONTHLY PRICES OF FINISHED IKON AND STEEL, 

1897 to 1899. 

(The combinations controlling the most of these products 

were organized in December, 1898, and the first half of 
1899.) 

8|8 §|fS 2|3 Si- 
Tear 3*- „ g-g. |. ;-* 

and o§ |* 2 £§ *Sg 

■ month - si sgsl ;l Sgt 

OP r^PBSO <t>P ajCL 

-T 1 I 1 Del- ft rl- T — 

1897. 

January $1.25 $1.40 $1.15 $1.22 

February 1.25 1.40 1.15 1.20 

March 1.12% 1.40 1.14 1.20 

April 1.05 1.25 1.15 1.14 

May 1.05 1.25 1.10 1.04 

June 1.00 1.25 1.07 .99 

July 1.07% 1.25 1.08 .95 

August 1.10 1.25 1.08 .99 

September . . . 1.10 1.25 1.14 1.07 

October 1.15 1.35 1.19 1.15 

November 1.10 1.35 1.20 1.15 

December 1.10 1.35 1.15 1.15 

1898 

January ..'... 1.05 1.40 1.11 1.15 

February 1.05 1.35 1.11 1.15 

March 1.05 1.35 1.06 1.05 

April 1.07% 1.25 1.05 1.05 

May 1.10 1.25 1.05 1.05 

June 1.12% 1.25 1.05 1.05 

July 1.02% 1.25 1.00 1.05 

August 1.05 1.25 1.06 1.05 

September . . . 1.05 1.25 1.14 1.08 

October 1.05 1.25 1.13 1.10 

November 1.02% 1.25 1.10 1.04 

December 1.05 1.25 1.11 1.00 

1899. 

January 1.05 1.30 1.15 1.12 

February 1.15 1.45 1.20 1.22 

March 1.45 1.70 1.41 1.38 

April 1.57% 1.75 1.50 1.65 

May 1.62% 1.90 1.56 1.75 

June 1.80 2.00 1.81 1.88 

July 1.85 2.30 2.00 2.00 

August 2.00 2.40 2.00 2.28 

September 2.25 2.50 2.10 2.50 

October 2.30 2.50 2.10 2.60 

November 2.30 2.50 2.20 2.56 

December 2.30 2.50 2.05 2.50 



Trusts and Monopolies. 77 



MONTHLY PRICES OF FINISHED IRON AND STEEL. 



Year 
and 

month. 



£ ETr-t- 
p P 

pp 



2 ^Ul 

2.0- 
r - en 



SOW 

• ft ft 
p ~ 
oq 

© J» 

- CJ 

IN 



2 w 
** ft 



r* ft 

* o& 

?T 

p 

5* 9 



s 



1897. 

January $1.20 $1.70 $1.25 $20.99 $2.15 

February ... 1.20 1.70 1.25 21.18 2.12%' 

March 1.20 1.70 1.25 19.57 2.07y a 

April 1.20 1.70 1.20 19.43 2.02y 3 

May 1.11 1.49 1.15 18.92 2.00 

June 1.10 1.25 1.15 18.83 1.90 

July 1.10 1.15 1.10 18.83 1.95 

August 1.08 1.15 1.12y 2 18.93 2.05 

September .. 1.14 1.15 1.17y 2 19.82 2.05 

October 1.15 1.20 1.20 21.63 2.15 

November . . 1.14 1.20 1.20 20.91 2.20 

December ... 1.13 1.20 1.20 19.62 2.15 H 

1898 

January .'..1.10 1.30 1.30 19.77 2.10 

February ... 1.10 1.30 1.15 19.87 2.07%' 

March 1.08 1.30 1.15 19.70 2.05 

April 1.12 1.30 1.30 19.86 2.00 

May 1.21 1.30 1.25 19.29 2.05 ; 

June 1.23 1.30 1.20 19.24 1.95 

July 1.20 1.30 1.20 19.24 1.95 

August 1.23 1.S7 1.30 19.33 2.00 

September .. 1.27 1.40 1.30 20.71 2.05 

October 1.27 1.38 1.30 20.81 2.00 

November ... 1.25 1.35 1.30 20.33 2.00 

December ... 1.26 1.35 1.30 20.22 1.95 \ 



1899. 

January .... 1.35 1.40 1.40 20.62 2.00 

February ... 1.55 1.42 1.40 21.91 2.35 

March 1.89 1.55 1.55 25.59 2.45 

April 2.18 1.64 1.75 30.13 2.80 

May 2.23 1.63 1.75 33.92 2.95 

June 2.48 1.82 1.90 37.88 3.05 

July 2.65 2.15 2.15 42.65 3.15 

August 2.80 2.40 2.25 46.00 3.20 

September . . 3.00 2.40 2.40 44.22 3.25 

October 3.00 2.40 2.40 45.82 3.15 

November . . 2.65 2.40 2.40 42.82 3.10 

December ... 2.40 2.40 2.40 37.29 3.00 



78 



Combinations, 



MONTHLY PRICES OF FINISHED IRON AND STEEL. 



Year 

and 

month. 



j-ri-P 

•3 S.O* 

2 N 



1897. 

Jan $1.76 

Feb 1.73 

March 1.70 

April 1.70 

May 1.68 

June 1.64 

July 1.60 

Aug 1.60 

Sept 1.70 

Oct 1.70 

Nov 1.69 

Dec 1.75 

1898. 

Jan 1.71 

Feb 1.75 

March 1.77 

April 1.65 

May 1.66 

June 1.70 

July 1.70 

Aug. 1.65 

Sept 1.67 

Oct 1.71 

Nov 1.71 

Dec 1.60 

1899. 

Jan 1.88 

Feb 2.02 

March 2.43 

Anril 2.60 

May 2.70 

June 2.90% 

July 3.02% 

Aug 3.10 

Sept 3.36% 

Oct 3.55 

Nov 3.55 

Dec 3.47V 2 



2 0td 

" 3 



$1.90 
1.85 
1.90 
1.80 
1.80 
1.75 
1.75 
1.65 
1.80 
1.80 
1.80 
1.80 



<-+■ r+ 





« 2. 



$1.50 
1.50 
1.45 
1.40 
1.35 
1.30 
1.35 
1.40 
1.40 
1.55 
1.45 
1.45 



1.90 

1.90 

1.90 

1.87% 

1.80 

1.80 

1.80 

1.80 

1.80 

1.82y 2 

1.82y 3 

1.82 y 2 



2.05 

2.25 

2.62 y 2 

2.80 

2.95 

3.20 

3.30 

3.40 

3.67 i/ a 

3.77y a 

3.88 

4.13 



oq P 



$1.28 
1.25 
1.25 
1.25 
1.23 
1.23 
1.20 
1.19 
1.19 
1.28 
1.14 
1.12 



1.45 

1.45 

1.47% 

1.37% 

1.35 

1.35 

1.35 

1.35 

1.35 

1.35 

1.35 

1.35 



1.40 
1.40 
1.65 
1.85 
1.90 
2.00 
2.30 
2.35 
2.55 
2.70 
2.80 
2.80 



1.10 
1.10 
1.10 
1.08 
1.08 
1.06 
1.06 
1.05 
1.08 
1.10 
1.10 
1.10 



1.18 
1.22 
1.48 
1.67 
1.65 
1.97 
2.20 
2.20 
2.50 
2.50 
2.40 
2.45 



asaa 



O C3 

n P 






$1.39 
1.35 
1.40 
1.40 
1.35 
1.31 
1.25 
1.26 
1.41 
1.49 
1.41 
1.39 



1.43 
1.45 
1.43 
1.31 
1.31 
1.35 
1.31 
1.26 
1.32 
1.33 
1.28 
1.27 



5a* 



$1.47 
1.45 
1.50 
1.47 
1.43 
1.41 
1.35 
1.36 
1.49 
l.o4 
1.49 
1.49 



1.55 
1.57 
1.55 
1.47 
1.45 
1.43 
1.36 
1.36 
1.43 
1.46 
1.39 
1.37 



1.43 

1.57 

1.94 

2.05 

2.10 

2.30 

2.42% 

2.50 

2.76% 

2.95 

2.95 

2.87% 



1.50 
1.73 
2.09 
2.25 
2.35 
2.57 
2.70 
2.80 
3.06 
3.17 
3.28 
3.28 



Trusts and Monopolies. 79 

MONTHLY PRICES OF FINISHED IRON AND STEEL. 



Year and month. 



1897. 



Machinery 

steel, open 

hearth, at 

Chicago, 

per ewt. 



January , . $1.60 

February 1.57^ 

March 1.55 

April 1.55 

May 1.50 

June 1.50 

July 1.45 

August 1.40 

September 1.45 

October 1.60 

November 1.60 

December 1.60 



Spring 

steel, at 
Chicago, 
per cwt. 



$1.85 
1.80 
1.75 
1.75 
1.60 
1.60 
1.55 
1.60 
1.70 
1.65 
1.65 
1.65 



Black 

merchant 

pipe, y 8 in. 

to 8 in. 

per ton. 



$35.70 
36.09 
33.80 
32.54 
32.21 
32.26 
33.58 
33.67 
34.98 
35.58 
35.62 
36.09 



1898. 

January 1.60 

February 1.60 

March 1.60 

April 1.60 

May 1.50 

June 1.50 

July 1.50 

August 1.50 

September 1.55 

October 1.55 

November 1.55 

December 1.55 



1890. 

January 1.55 

February 1.60 

March 2.10 

April 2.40 

May 2.40 

June 2.55 

July 2.70 

August 2.90 

September 2.95 

October 2.«5 

November . . . . , 2.95 

December 2.95 



1.65 


35.10 


1.65 


33.75 


1.60 


33.90 


1.60 


27.97 


1.60 


27.92 


1.60 


27.62 


1.60 


28.37 


1.60 


28.64 


1.60 


31.46 


1.60 


32.44 


1.60 


33.42 


1.60 


33.83 


1.60 


35.43 


1.75 


32.62 


2.25 


32.12 


2.40 


34.94 


2.50 


36.13 


2.85 


40.48 


3.20 


47.84 


3.20 


64.07 


3.50 


66.80 


3.60 


77.09 


3.60 


79.76 


3.60 


81.65 



8o Combinations, 

MONTHLY PRICES OF OLD MATERIAL, COAL AND 

coke, 1897 to 1899. 

(The combinations controlling the most of these products 
were organized in 1898, and the first half of 1899.) 

Year "SS2 

and ** IT 

month. o£ P 

crs» 3 

' ©ST 
1897. 

January $12.00 

February r 13.00 

March 11.75 

April 11.50 

May 11.00 

June 10.50 

July 11.00 

August 11.00 

September 12.00 

October 12.25 

November 12.00 

December 12.00 

1898. 

January 12.25 

February 12.25 

March 12.00 

April 12.00 

May 12.25 

June 12.37^ 

July 12.50 

August 12.50 

September 12.62^ 

October 12.75 

November 12.75 

December 12.50 

1899. 

January 13.00 

February 14.00 

March 16.25 

April 18.00 

May 18.00 

June 18.00 

July 18.75 

August 21.00 

September 27.50 

October 30.00 

November 30.00 

December 27.00 



koft a m 


bOOSG 


op2.o 


>>E3*ft 


O&3 ~p 


o p 


°o V 




t R ai 


crP ft 

0Q P 






n TJT 


»1 rh 


$7.00 


$7.00 


7.00 


7.00 


7.00 


7.25 


6.75 


7.50 


6.00 


7.00 


5.50 


7.00 


5.75 


7.25 


5.75 


7.25 


6.50 


7.25 


7.00 


7.50 


6.50 


7.50 


6.50 


7.50 


6.50 


7.50 


6.75 


8.25 


7.00 


8.00 


7.00 


8.50 


6.50 


8.75 


6.50 


8.00 


6.50 


7.75 


6.50 


8.00 


6.62 y a 


8.25 


6.75 


8.25 


6.25 


8.^5 


6.75 


8.25 


7.00 


8.25 


7.75 


9.00 


8.75 


11.50 


9.00 


12.00 


9.00 


11.50 


8.75 


11.50 


8.50 


1200 


9.00 


12.50 


13.00 


15.00 


14.50 


16.00 


13.50 


15.50 


13.00 


14.00 



Trusts and Monopolies. 8i! 

MONTHLY PRICES OF OLD MATERIAL, COAL AND 
COKE. 

xear ©ww? 

month. - » ~ S o 

1897. 

January $2.70 

February 2.70 

March 2.70 

April 2.70 

May 2.70 

June 2.70 

July ,. 

August 

September 

October 2.70 

November 2.70 

December 2.70 

1898. 

January 2.75 

February . . 2.75 

March 2.75 

April 2.75 

May 2.75 

June 2.75 

July 2.75 

August 2.75 

September 2.75 

October 2.75 

November 2.75 

December 2.75 

1899. 

January 2.45 

February 2.45 

March 2.45 

April 2.45 

May 2.45 

June 2.45 

July 2.45 

August 2.50 

September 2.50 

October 2.75 

November 3.00 

December 3.00 



tof» P n 


*Ort < O 


oke, 
ellsvil 
t ove 
,000 1 


oke, F 
ania, 
ago, 
,000 1 


o-P^* • 


a- P a> 


OQ 00 P _ 

•a'oo 


nngyl- 
t Chi- 
per 
s. 


|1.87% 


$4.55 


1.87% 


4.55 


1.62 y a 


4.55 


1.55 


4.55 


1.40 


4.55 


1.50 


4.55 


1.50 


4.55 


1.50 


4.55 


1.45 


4.55 


1.62% 


4.55 


1.75 


4.55 


1.75 


4.55 


1.75 


4.55 


1.75 


4.55 


1.75 


4.40 


1.75 


4.40 


1.75 


4.40 


1.75 


4.40 


1.75 


4.40 


1.75 


4.40 


1.75 


4.40 


1.50 


4.50 


1.50 


4.40 


1.60 


4.40 


1.60 


4.55 


1.60 


4.55 


1.75 


4.55 


1.75 


4.55 


2.05 


4.55 


2.20 


4.55 


2.12% 


4.75 


2.50 


4.75 


2.62% 


5.25 


2.75 


5.50 


2.87% 


5.50 


2.87% 


5.75 



82 



Combinations, 



MONTHLY PRICES OF SMOOTH WIRE, 1897 TO 1899. 
(The combination controlling from 75 to 98 per cent, of 
this product was organized in January, 1899.) 



1897. 

January $1 

February 1 

March 1 

April 1 

May 1 

June 1 

July 1 

August 1 

September 1 

October 1. 

November 1 

December 1 

1898. 

January 1. 

February 1 



,21 

.15 

16 

,15 

12y 2 

15 

,10 

10 

14 

20 

17% 

17 

18 
18 
20 
18 
15 
15 
15 
15 
15 
15 
15 
12 



March 1 

April 1 

May 1 

June 1 

July 1 

August 1 

September 1 

October 1 

November 1 

December 1 

1899. 

January 1.29 

February 1.46% 

March 1.79 

April 1.92% 

May 1.95 

June 2.15 

July 2.371/2 

August 2.50 

September 2.76% 

October 2.95 

November 2.95 

December 2.87 % 

We then find the following variation in prices 
between December, 1898, and December, 1899. 



Corn decreased . . 

Wheat increased . . 

Barley decreased . . 

Rye No. 2 . decreased . . 

Oats decreased . . 

Hops decreased . . 

Refined Sugar decreased. . 

Sugar, raw decreased . . 

Refined export oil increased . . 



14.32 

.00.75 

13.94 

6.13 

45.90 

40.00 

1.05 

3.43 

52.74 



per cent. 



Trusts and Monopolies. 



83 



Crude oil increased . . . 48.02 

Proof Spirits decreased. . . 17.76 

Lager beer 000 0000 

Cheroots 000 0000 

Cigarettes 000 0000 

Smoking tobacco increased. . . 4.54 

High grade leaf tobacco decreased... 1.43 

Medium grade leaf tobacco. .. .decreased. . . 2.19 

Low grade leaf tobacco increased . . . 9.23 

Soda crackers XXX increased... 8.33 

Soda crackers, standard 000 0000 

Ginger snaps XXX 000 0000 

Flour, spring wheat, patent process, 

increased. . . 0.29 
Flour, good spring supers low grade, 

decreased. . . 7.87 

Flour, winter wheat decreased. . . 3.12 

Lard, steam refined increased. . . 1.15 

Rye flour, good to choice decreased. . . 2.10 

Corn meal, white increased . . . 5.00 

Oat meal increased . . . 16.21 

Rolled oats increased . . . 18.18 

Tearl starch increased. . . 1.72 

Glucose decreased. . . . 9.37 

Mixing and jelly glucose decreased. . . 9.56 

Coal increased . . . 9.09 

Coke, Connellsville increased. . . 79.68 

Coke, Pennsylvania increased... 30.68 

American tin plate increased. . . -61.2:) 

Pig tin increased . . . .50.53 

Steel billets and slabs increased. . .119.59 

Machinery, steel ....... increased . . . 90.32 

Spring steel increased. . .125.00 

Black merchant pipe increased. . .141.35 

Old iron rails increased . . . 116.00 

Scrap No. 1 increased. . . 4)2.59 

Scrap cast increased. . . 69.69 

Pig iron, foundry No. 2 increased. . .113.63 

Bessemer pig iron increased . . . 134.96 

Steel billets increased . . . 145.25 

Slabs increased . . . 99.42 

Steel rails increased . . . 100.00 

Charcoal, Lake Superior increased. . .121.74 

Gray forge pig iron increased . . . 127.48 

Bar iron increased . . . 119.04 

Bar iron, best refined increased. . .100.00 

Bar iron, all muck increased. . .150.00 

Steel tank plates increased. . . -90.47 

Steel beams increased. . . 77.77 

Steel Angles . .increased. . . 84.61 

Skelp (plates) increased... 84.42 

Steel sheets increased. . . 53.84 

Barbed iron, galvanized increased. . .117.18 

Smooth wire increased . . . 156.69 

Cut steel nails increased . . . 107.40 

Cut nails increased . . . 122.72 

t Wire nails increased . . . 139.42 



84 Combinations, 

It then appears that of the articles shown fifteen 
show a decrease in price, five show stationary 
prices, while all the remaining articles show an 
increase. The average increase shown by all articles 
exclusive of iron and steel and their products is 
three and thirty-five hundredths per cent., while 
the average increase shown by iron and steel and 
their products including tin plate is one hundred 
seven and thirty-two hundredths per cent. Thus 
we see that there is an average increase in the 
price of the products of iron and steel over and 
above that shown by other articles amounting to 
one hundred three and ninety-seven hundredths 
per cent., and as it appears from the notes to the 
several preceding tables that combinations control- 
ling the greater part of these latter products were 
organized during the year 1898 and the early part 
of 1899, it seems that this enormous increase in 
prices may be fairly chargeable to the effect of 
combinations. 

The power of monopolies to regulate prices by 
controlling the supply would appear to carry with 
it the power, to a limited extent at least, to regu- 
late wages by increasing or diminishing the de- 
mand for labor within certain lines of employ- 
ment, but, as will presently be seen, this power is 
likely to prove to be much less effective than we 
might at first be led to believe. Labor is only 
temporarily dependent upon the demand for pro- 
duction of the articles controlled by the monopoly, 
and as soon as the intention of the monopoly to 
restrict production has been recognized, labor will 
seek employment elsewhere. V In those classes of 
employment in which a greater or less amount of 



Trusts and Monopolies. 85 

special skill is required which it has perhaps taken 
a considerable length of time to acquire, the mo- 
nopoly will have more complete control over its 
employees than in other employments, for the em- 
ployees will be very reluctant to abandon the 
trade of special skill which they have labored so 
hard to acquire, and they w T ill be inclined to de- 
pend upon the old employment, so long as the com- 
pensation does not fall too far below that which is 
paid for other classes of work. 

The supply of labor resembles the supply of 
water which is continually flowing onward in a 
mighty stream to supply the wants of all mankind. 
These artificial restrictions such as place, skill, as- 
sociation, etc., are mere temporary dams con- 
fining portions of its volume within certain limits 
for a time, but if subjected to undue pressure, it 
soon overflows its barriers and rejoins the main 
stream. This movement of labor to preserve its 
general level is constant throughout the civilized 
world. It moves from employment to employment, 
from state to state, from nation to nation, and 
even into the uncivilized portions of the globe, in 
obedience to a natural law of gravitation, just as 
water is ever seeking to find its level. Thus, if 
the demand for labor is brisk in one line of em- 
ployment while it is slack in others, wages will tend 
to rise in the one in which the demand is most 1 
active, but the increase in wages will at once at- 
tract new laborers from other trades and the up- 
ward tendency of wages will be checked; or if 
labor be less plentiful in California than it is in 
JSTew York, the rates of wages will be high in Cali- 
fornia and there will be a steady flow of laborers 



86 Combinations, 

into that state "until the rates of wages have been 
reduced to about the level which prevails in other 
states ; or if labor be scarce in America and plen- 
tiful in Europe, and the rates of wages correspond- 
ingly higher in America, there will be a steady 
stream of labor flowing westward until the dif- 
ference in the conditions of the labor market shall 
be more nearly equalized. We have witnessed this 
movement ever since the settlement of the country, 
accentuated by records of greatly increased immi- 
gration during periods of unusual prosperity and 
high wages. It is this great, world supply of labor 
and the demands which are made upon it, that 
must always control the price of labor, which we 
call wages. 

On account of the various economies which it 
is possible to effect in large scale production, there 
is less labor required to produce a given quantity 
of any monopolized article, and, if the production 
of all commodities were controlled by monopolies, 
and they were left free to maintain a high scale 
of prices, it is clear that there would be nothing to 
induce an increase in the consumption or demand 
for the goods. It follows that the amount of labor 
required would be materially diminished, and that 
the decreased demand for labor would certainly 
result in lowering the standard of wages; but 
monopolies can never hope to control the entire 
field of production. The prices fixed by combi- 
nations and monopolies from which they propose to 
reap their harvest, will usually be found to induce 
a spontaneous growth of small competitors in the 
business, which, so long as they control but a small 
percentage of the trade, may be deemed to be too 



Trusts and Monopolies. 87 

trifling to deserve serious attention, and may be 
allowed to pursue their course without molesta- 
tion; but as soon as they begin to extend their 
trade beyond these limits and to make any ap- 
preciable inroads into the business of the combi- 
nations, the monopolists will at once set upon them 
and exert all their powers to recover whatever pres- 
tige has been lost, and may pursue the offending 
rivals even to the point of extermination. As soon, 
however, as these sources of annoyance have been 
suppressed and prices have been restored to a profit- 
yielding level, new competitors will again begin to 
appear to repeat the history of their predecessor. 

These numerous small competitors create a not 
inconsiderable demand for labor; the wants of 
mankind are so numerous and varied as to require 
the ministration of an almost endless variety of 
services; and invention and discovery are con- 
stantly adding to the list of items of production; 
so it seems to be inevitable that there must always 
be a considerable demand for labor which is be- 
yond the power of the monopolies to control, and 
all these independent sources of employment serve 
to neutralize the effects of combination and mo- 
nopoly upon the labor market. 

The introduction of new industries, new methods 
of building, and new modes of supplying the vari- 
ous requirements of society, are constantly opening 
up new and ever widening fields for the employ- 
ment of labor, both by increasing the consumption 
and demand for the materials used in their con- 
struction, thus increasing the demand upon the 
older concerns which have already engaged in the 
production and manufacture of such materials, 



/ 



88 Combinations, 

and by affording permanent employment to large 
numbers of persons in their construction and oper- 
ation. 

The introduction of electric railways not only 
into large cities and their immediate suburbs, 
but all through the country districts, has built up 
a business of enormous proportions, and we have 
much reason to believe that it is yet only in its 
infancy. The construction of roadways, the manu- 
facture of rolling stock and machinery, the erec- 
tion of power houses, and the electric equipment of 
the lines, afford employment to large numbers of 
persons in all classes of labor from the unskilled 
laborer to the finest mechanic, and the operation 
of the roads affords permanent employment to 
many more. 

The introduction of iron and steel construction 
into the erection of large buildings in all of our 
important cities, the replacing of wood by iron and 
steel in the building of vessels of all classes from 
the small lake and river boats to the great ocean 
liners, and the use of steel cars by the railways, 
have revolutionized these industries and have cre- 
ated a new and increasing demand for iron and 
steel; the introduction of the telephone through- 
out the country districts has created an additional 
demand for linemen and for the manufactured 
instruments and equipments; the very general 
construction by the railroads of iron and steel 
structures for the old wooden bridges and trestle 
work with which they were formerly content to 
endanger the lives and property of their patrons, 
and the growing disposition to substitute iron and 
steel for more perishable materials in the construe- 



Trusts and Monopolies. 89 

tion and manufacture of all classes of work and 
commodities, afford sources of employment for 
labor which seem to absorb it as rapidly as it is 
displaced by combinations in other directions. If 
the power of monopolies to maintain unreasonably 
high prices can be restrained, and some portion of 
the benefits arising from the improved methods 
and reduced cost of production can be secured to 
the public in the form of reduced prices, the de- 
velopment of new enterprises will be greatly en- 
couraged, the consumption of more durable mate- 
rials and the demand for better classes of goods 
will be greatly increased, and the demand for labor 
will expand in the same proportion. Mr. John W. 
Gates, chairman of the American Steel and Wire 
Company, testifying before the Industrial Commis- 
sion in 1900, said, that in his judgment the new 
output of steel cars, steel vessels and steel frames 
for buildings and bridges constituted as large a 
tonnage as the total tonnage of the United States 
in iron and steel fifteen or twenty years ago, and 
that it is increasing every year. 

As we have already seen in another chapter the 
consolidation of several independent manufactur- 
ing establishments into one is usually accompanied 
by the discharge of large numbers of superintend- 
ents, foremen, bookkeepers, clerks, salesmen, me- 
chanics, laborers, etc. The number thus displaced 
by combination has doubtless already amounted to 
many thousands. Mr. Gates, testifying before the 
Industrial Commission on that point, says that 
his company has dispensed with about two hun- 
dred traveling salesmen and about fifty per cent, 
of the high priced men such as presidents, vice- 



90 Combinations, 

presidents, secretaries, treasurers, auditors, super- 
intendents, etc. Combination has certainly proved 
to be a great misfortune to most of these men and 
especially to the traveling men, for most of them 
had received large salaries, and being obliged in 
a measure to reflect in their manner of living the 
financial prosperity of the houses represented by 
them, they had acquired habits of extravagance 
"which made it doubly hard for them to conform 
their expenses to the reduced salaries which many 
of them have been obliged to accept in other em- 
ployments to which they have been driven by the 
rapid extension of combination from one branch 
of business to another. The woes of the traveling 
salesmen have been echoed by the hotel keepers in 
every little town throughout the country who once 
numbered them among their most regular guests, 
and even the railroads miss the large revenues 
which had annually been derived from the tens 
of thousands of traveling men who have been dis- 
placed. 

Mr. Edson Bradley, President of the American 
Spirits Manufacturing Company and Vice-Presi- 
dent of the Distilling Company of America, testi- 
fied before the Industrial Commission that the 
whiskey combinations had dispensed with the 
services of three hundred traveling salesmen. As 
we have already seen, Mr. Gates testified that the 
American Steel and Wire Company had dispensed 
with about two hundred traveling salesmen, and 
Mr. A. S. W. Koth, Publisher of the Eetailers 
Journal, Chicago, and Secretary of the Cook 
County Eetail Dealers Association, testified before 
the same commission as follows: "The tobacco 



Trusts and Monopolies. 91 

trust discharged five thousand traveling men in one 
day, and the spool and cotton trust also discharged 
all the salesmen. The trust throws thousands of 
people out of work, and the goods are no cheaper 
than before/' Mr. P. E. Dowe, President of the 
Commercial Travelers' National League, presented 
the following estimate to the Industrial Commis- 
sion in June, 1899: "From the figures supplied 
me by commercial men, I submit the following, — ■ 
more than thirty-five thousand salesmen have been 
thrown out of work through the organization of 
trusts and twenty-five thousand reduced in salary, 
some being retained at a big cut in compensation 
in house positions, others as traveling agents — sixty 
thousand salesmen directly affected by trusts. . . . 
We will now consider the effect of thirty-five thou- 
sand commercial men out of work and twenty- 
five thousand at two-thirds their previous salary, 
assuming that twelve thousand five hundred of the 
twenty-five thousand still act as travelers. One 
hundred fifteen million dollars represents the an- 
nual expenditures cut off by the direct influence 
of trusts, as follows : sixty million loss in salaries ; 
twenty-seven million dollars for railroad tickets, 
sleeping cars, and excess baggage, an amount equal 
to the entire surplus earnings of all the railroads 
of the country for 1898. The loss to hotels can 
safely be estimated at twenty-eight million dol- 
lars/' The bookkeepers, foremen, superintend- 
ents, etc., who have been displaced have been 
obliged to seek elsewhere for similar employment 
and perhaps in most cases to adapt themselves to 
other classes of duties, and the mechanics and 



92 Combinations, 

laborers have had to find new employment in other 
lines of trade. 

What, then, has been the effect upon labor of 
this displacement of employees? The throwing of 
so great a number of persons out of employment 
within so short a time would certainly produce a 
noticeable increase in the supply of labor-seeking 
employment, and could not fail to be reflected in 
the lower wages, if their labor were not immedi- 
ately absorbed by other employments. There has 
not been any appreciable increase of unemployed 
labor during the last four or five years, but on the 
contrary employment has been more general than 
for several years preceding; and wages have not 
been reduced but in many instances have been 
raised. Thus, we fail to discover either of the 
two general manifestations of the evil effect which 
combinations might be expected to exert upon 
labor. Mr. Jenks thus summarizes his analysis of 
the tables presenting the report made by combina- 
tions to the Bureau of Labor, in response to ques- 
tions as to their number of employees and the 
wages paid, published in the Bulletin of the De- 
partment of Labor, No. 29, July, 1900. 

"This table shows, too, that in a majority of 
cases there has been an increase all along the line, 
both in the number of employees and in the total 
wages. Without entering into the details regard- 
ing the various classes of labor, it will be perhaps 
worth noting that taking all the employees together, 
there has been but two cases of a decrease in the 
number of employees, out of thirteen reporting, 
and but one case, out of the same number, in the 
decrease in the total annual wages. This table 



Trusts and Monopolies. 93 

seems also to show that the percentage of increase 
in wages had been more than that of the increase 
in the number of men, thus confirming again the 
statements as to the general average increase of 
wages." And of the next table, he says: "For 
the combinations reporting, this table shows an 
increase in the average annual wages paid to 
skilled laborers, to unskilled laborers, and to clerks, 
and a decrease in the annual wages paid to super- 
intendents, and foremen, traveling salesmen, and 
the unclassified employees. Taking all of the em- 
ployees together, the percentage of increase of 
average annual wages has been twelve and sixty-one 
hundredths. The greatest increase has appeared in 
the case of unskilled laborers, the greatest percent- 
age of decrease in the unclassified employees, while 
traveling salesmen have lost much more in average 
wages than have superintendents or foremen, the 
figures being respectively seven and forty-three 
hundredths and two and seventy-seven hundredths. 
In all cases of employees, taking all of the estab- 
lishments which have reported, there has been a 
decided increase in the number of employees ; and 
in all cases, with the exception of the traveling 
salesmen, there has been also an increase in the 
total amount of wages paid. The traveling sales- 
men have received less by three and fifty-seven 
hundredths per cent." 

Mr. Jenks calls particular attention to the dan- 
ger of attempting to draw definite conclusions from 
the tables in the Bulletin, the number of combina- 
tions reporting being so small. They had been so 
very recently organized, and at a time when chang- 
ing business conditions affected prices, wages, and 



94 Combinations, 

employment, in all classes of business, whether 
conducted by private establishments or by combi- 
nations, that it is almost impossible to say what 
portion of the change was due to the effect of com- 
bination. His general conclusion from the tables 
appears to be that it was then too early to deter- 
mine what really was the effect of combination 
upon wages and labor, and that while the figures 
appear to show that combinations had paid more 
wages, it was not safe to assume that the ultimate 
effect of combinations would be to increase wages. 
We believe, however, that the fact that combina- 
tions had paid higher wages is sufficient to show 
that the number of unemployed has not been in- 
creased and the wages have not been reduced. 

The first effect of combination upon labor ap- 
pears to have been to cause something of a repeti- 
tion of the disturbances produced in the early sev- 
enties by the introduction of the self-binding mow- 
ing machine among the farmers. Thousands of 
men throughout the country had been accustomed 
for years to secure steady employment at high rates 
of wages during harvest time, and now suddenly 
by the introduction of these new machines, they 
found themselves thrown out of employment. They 
banded together in large numbers and marched 
through the country burning and destroying prop- 
erty on all sides in revenge for the wrong which 
they fancied had been done them. But, as soon 
as the panic which was just then paralyzing busi- 
ness of all kinds, began to disappear and the wheels 
of commerce began to turn again, this army of the 
unemployed was speedily absorbed by the general 



Trusts and Monopolies. 95 

demands of trade, and the use of the self binders 
has ever since gone on without a protest. 

The only difference in the situation appears to 
be that at the time of the introduction of the labor 
saving self binders, the country was in the throes 
of a panic and all the avenues of employment were 
blockaded, while at the time of the introduction of 
labor saving combination the country was just re- 
covering from the effects of a panic, and the de- 
mand for labor was increasing in all directions. 
Temporary hardships have doubtless been caused 
to many individuals by the formation of these large 
industrial combinations, but they seem to promise 
more steady and regular employment both to capi- 
tal and to labor. 

From what has already been said, it appears that 
notwithstanding the power of monopolies to con- 
trol production, their ability to conduct business 
with less labor per unit of production, and the dis- 
charge of large numbers of employees in conse- 
quence of the consolidation of competing concerns, 
monopolies have as yet exercised no perceptible in- 
fluence upon wages. 

The increasing demands of new enterprises, and 
the increased consumption of the products con- 
trolled by monopolies, have served to neutralize the 
natural tendency of monopoly in production — 
which is to depress wages; and we believe that, 
with the aid of judicious legislation to restrain the 
abusive exercise of the powers acquired by these 
monopolistic corporations, these same influences 
will continue to secure for labor, at least as fair 
a rate of compensation as it had received under the 
old system of production. 



96 Combinations, 

There are those who tell us, with much pretended 
show of public spirit, that the organization of 
large monopolistic corporations enables them to pay; 
higher wages to their employees, and to make 
lower prices to the consumers ; and seek to convey, 
the impression that such are the purposes of the or- 
ganizations. But this is the merest hypocrisy. The 
purpose of the organizations is selfish gain, and 
if it becomes necessary to increase wages or lower 
prices in order to increase that gain, they will do 
so — but not otherwise. Profit is the object, and 
higher wages and lower prices are merely the in- 
cidents which they may be obliged to concede in 
order that their own profits may be increased. No 
body of men is going to band itself together and 
expend its money, time, and energy, merely to raise 
the wages of labor, or to afford lower prices to con- 
sumers; it is contrary to the instincts of human 
nature and to human experience, and no one will 
be deceived by such shallow pretenses. These 
large corporations are mere business agents, for 
business purposes only, but as such they have come 
to stay. 

The new industrial organization is as much of a 
labor saving machine in the management and con- 
trol of production as was the machine for the cut- 
ting of grain, the saw mill, or the lathe, and we 
can no more retreat from the use of the one than 
of the other. It is doubtless true that many of the 
monopolistic organizations of to-day are in a sense 
experimental, that much difficulty will yet be ex- 
perienced on account of over capitalization, over 
valuation, reckless management, speculation, and 
worst of all, the desire of the professional promoter 



Trusts and Monopolies, 97 

to reap large profits for himself regardless of the 
fate of the organization; and that they will have 
to undergo various processes of reorganization such 
as many of them have already passed through; 
but these will be merely alterations in the title 
and will have but little effect upon the operation 
of the plants. The various elements of any dis- 
tinct line of business, which have been brought to- 
gether into a combination, are not likely ever again 
to become severed. This we believe to be true of 
such combinations as the American Sugar Refining 
Company, the Standard Oil Company, etc., but 
with such as the United States Steel Corporation, 
the Anthracite Coal Combination, etc., in which 
transportation and perhaps other distinct indus- 
tries are joined with manufacture, mining, etc., we 
believe that there should, and will be a severing of 
these several interests. 

In addition to the changes of ownership and 
control of these corporations caused by reorgani- 
zation, foreclosure, etc., there will also be a change 
of title constantly going on in the form of sales of 
stock, but neither mode of change will have any 
immediate effect upon the business of the concern. 
It will continue to go on regardless to whom the 
profits may go, just as in the case of a railroad 
company, no matter how often the stock may be 
sold, or how completely the board of directors may 
be changed, the trains run every day just the same. 
These changes in the ownership of the stock will, 
however, have but little or no effect upon the re- 
lations between the corporations and labor. The 
interests and purposes are the same, and it makes 
no difference to the employee whether the stock of 



98 Combinations, 

the corporation is held by twenty persons or by 
twenty thousand persons, and it is a matter of 
equal indifference whether the stock be held by 
laboring men, business men of small means, or by 
millionaires. All are equally anxious to secure 
their dividends. 

After these large industrial corporations shall 
have passed through the process of reorganization a 
sufficient number of times to have squeezed out all 
the watered stock, and reduced their capitalization 
to something like the cost of duplication, and shall 
pay their dividends, be they large or small, only 
upon stock which represents real value in the busi- 
ness, then they will begin to assume the position of 
permanent institutions and afford safe and remu- 
nerative opportunities for investment by people 
-who have neither the time nor the opportunity to 
follow the various manipulations of the stock mar- 
;ket which engage the attention of the stock ex- 
changes, and who, therefore, cannot trust the stocks 
of the industrial corporations of to-day. The large 
blocks of stock now held by single individuals 
will gradually become scattered until in time the 
share holders of many of the large business cor- 
porations may be numbered by the thousands, as is 
already the case with our great railroad systems. 

Having thus noted the effects of combination 
and monopoly upon production, prices, wages, and 
labor, let us now inquire a little as to their effects 
upon the employers. The importance of this 
branch of our subject is not to be estimated merely 
by the number of persons who are directly affected, 
for their position as leaders of business, their repu- 
tation for shrewdness and sound judgment, and 



Trusts and Monopolies. 99 

their experience in the employment and direction 
lof men, have served to secure to them a sort of 
natural leadership in the social and political affairs 
of the community, and whatever effects their con- 
dition will have a much greater influence upon 
society at large than that which concerns only an 
equal number of persons in private life. Any 
serious disturbance of the condition of those whom 
we have learned to look upon as the bulwarks of 
society and the leaders in progress and civilization 
must always be attended by a more or less general 
disarrangement of the affairs of society. The dis- 
comfiture of the leaders is certain to produce a 
sort of panic among the people. They pause in 
suspense, holding their breath, as it were, and hold- 
ing fast to their purse strings at the same time; 
they become suspicious of the outcome of every 
new enterprise, and a general feeling of uncer- 
tainty and distrust prevails. 

A repetition of such disturbances would, there- 
fore, on first thought appear to be a most deplora- 
ble misfortune ; but such has ever been the history 
of progress and civilization. The old forms must 
ever give way to the new, and the loftiest columns 
have the longest distance to fall. 

The early manufacturers who employed a few 
mechanics to work at hand labor in their shops, 
were men of influence and importance among the 
people of their day ; but the introduction of steam 
power left their mode of manufacture behind the 
age and they were obliged to adopt the new sys- 
tem, or, if they could not afford to conduct busi- 
ness on a sufficiently large scale to employ steam 
power, to go out of business. The result was that 



LofC. 



ioo Combinations, 

many were obliged to give up business and to seek 
employment for themselves in the larger factories 
which had supplanted them. 

The development of steam power soon led to the 
introduction of larger and more expensive ma- 
chinery, and the smaller concerns, in many in- 
stances, found it necessary to unite either with 
others engaged in the same business, or with out- 
side parties who were willing to put their capital 
into the business, and to enter partnership with 
them. Thus was joint ownership gradually sub- 
stituted for individual ownership. 

The growth of commerce and the increasing de- 
mands of trade soon began to overtax the capacity 
of partnership management, and corporations be- 
gan to supersede the smaller firms, and individual 
concerns then engaged in the business of manu- 
facture. 

The advantages of large scale production began; 
to be recognized, many modes of combination were 
devised and experimented with, and the numerous 
corporations which had before so mercilessly ab- 
sorbed the partnership and individual concerns 
which had preceded them, began to merge into a 
few great corporations, each of which was designed 
to control its particular line of industry. 

Such have been the successive steps in the de- 
Telopment of our industrial system, and the billion 
dollar United States Steel Corporation is merely 
the natural outgrowth of the evolution which has 
been going on among our industrial and commer- 
cial institutions for the last hundred years. 

The employers of recent years include corpora- 
tion as well as the individual proprietors and the 



Trusts and Monopolies. 101 

members of partnership concern; and the forma- 
tion of large monopoly corporations has undoubt- 
edly driven many of them out of business. The 
smaller concerns have usually been obliged to sell 
out or be forced out of business by the great corpo- 
rations, but the larger ones have frequently been 
able to secure the retention of many of their officials 
in connection with the business of the monopoly. 
The number of those high officials who have been 
thus fortunate in being retained by the combina- 
tions in employment of any kind, was estimated 
by Mr. John W. Gates, in his testimony before the 
Industrial Commission, to have been fifty per cent, 
in the cases of the companies which have been ab- 
sorbed by the American Steel and Wire Company. 
If, then, fifty per cent, of the officials of corpora- 
tions which have become parties to the combina- 
tion, and a presumably much larger percentage of 
the individual proprietors and smaller corporations 
engaged in the business directly affected by it, have 
been thrown out of business through the operation 
of combination, it is easy to believe that the num- 
ber of persons directly affected has been very con- 
siderable. 

We have already remarked that this displace- 
ment of employers by the continual change in the 
size and form of organization of the business con- 
cerns has been going on for generations, but a 
more definite idea of the extent to which it has al- 
ways attained, may be derived from a moment's in- 
spection of some of the statistics presented in the 
Twelfth Census. 

In Volume Seven of the Twelfth Census of the 
.United States, 1900, Manufactures, Part One, the 



tofa 



102 Combinations, 

Director of the Census summarizes the develop- 
ment of the factory system in the United States 
as follows: "The factory system of manufacture, 
so called in contrast to domestic and shop manu- 
facture, had practically no existence in the United 
States at the opening of the nineteenth century, 
although its development in England, particularly 
in the textile industries, had been rapid during 
the last quarter of the eighteenth century. . . . 
It was not until about 1840 that the factory method 
of manufacture extended itself widely to miscella- 
neous industries, and began to force from the mar- 
ket the hand-made products with which every com- 
munity had hitherto supplied itself. It seems 
probable that until about the year 1850, the bulk 
of general manufacturing done in the United 
States was carried on in the shop and the house- 
hold, by the labor of the family or individual pro- 
prietors with apprentice assistance, as contrasted 
with the present system of factory labor, compen- 
sated by wages, and assisted by power. Since that 
date, the relative value of the manufactured prod- 
ucts of the shop and the household have steadily 
decreased, until at the Twelfth Census, it repre- 
sents but an insignificant part, say one thirteenth, 
of the total value of products." 

In the same volume of the Census, the total 
number of establishments engaged in manufactur- 
ing and mechanical industries, is given as 512,- 
254 which produced goods valued at $13,004,400,- 
143 ; of these 372,703 were owned and operated by 
individual proprietors, and produced an average 
of $7,176 worth of products each; 96,715 were 
owned and operated by partnerships, and 



Trusts and Monopolies. 103 

produced an average of $26,524 worth of products 
each ; and 40,743 were owned and operated by cor- 
porations, with an average production of $189,- 
813 for each establishment. Thus we see that at 
the same average capacity as that of the establish- 
ments owned by individual proprietors in the year 
1900, it would have required 1,812,207 individual 
establishments to equal the production of the year 
1900, which was produced by 512,254 establish- 
ments; and that the introduction of the various 
forms of joint proprietorship has already reduced 
the number of establishments 1,299,953, or seventy- 
one and seventy-three hundredths per cent, below 
what it would have been under individual owner- 
ship, and that apparently that number of pro- 
prietors has already been displaced. 

It appears, then, that this displacement of em- 
ployers has been a feature of the industrial his- 
tory of our country ever since its earliest days, 
and that a relative reduction in the number and 
increase in the size of the establishments have 
attended every step in the development of our in- 
dustrial system. We must not, therefore, be too 
hasty in assuming that the displacement of em- 
ployers by the great corporations of to-day is neces- 
sarily an unmixed evil. It may be that the rush 
to combination has been too impetuous, and that 
it has found us unprepared to meet the new prob- 
lems and conditions presented by it; but it is 
merely a sudden expansion of the ordinary busi- 
ness corporation with which we have all become 
familiar, and we must adjust our laws to meet 
the requirements of the new conditions, just as 
we have been obliged to meet the ever changing 



I04 Combinations, 

conditions caused by the development of our meth- 
ods of transportation, from the stage coach upon 
the country road to the drawing-room car on a 
limited express train. Every unnecessary person, 
be he employer or employee, who is eliminated 
from the process of manufacture, is a distinct item 
of economy in production; but it is our duty to 
see that a fair share of the benefit of that economy 
is secured to the people, and that it is not all 
diverted to swell private profits. 

Having now examined some of the more impor- 
tant points in which combinations and monopolies 
directly affect the welfare of the people, let us 
for a moment, in conclusion, inquire into their 
effects upon the government itself. When our in- 
dustries were in their infancy and consisted of a 
large number of small institutions widely scat- 
tered throughout the country and owned by numer- 
ous private individuals, there were no lobbies in 
constant attendance at our legislative halls seek- 
ing to secure the passage of measures or to obtain 
special privileges; the manufacturing business was 
merely a portion of the general interests of the 
people, and no one thought of its ever exercising 
any undue influence in the affairs of the govern- 
ment. National elections were conducted with 
small campaign funds, and no class of individuals 
felt called upon to contribute large sums of money 
to secure the election of an administration which 
would give to them no greater protection or bene- 
fit than was guaranteed to every other citizen. 
But as concentration progressed and great insti- 
tutions replaced numerous smaller ones, lobbies 
began to appear at the seats of government to labor 



Trusts and Monopolies. 105 

for the enactment of legislation in the interests 
of private enterprises. With the appearance of 
trusts and combinations, these lobbies became 
greatly increased, and emissaries of special interest 
became permanent features of every legislative 
assembly. The manufacturing interests were no 
longer a mere part of the general concern of the 
nation, which might be properly cared for by the 
regularly elected representatives of the people, but 
special delegations were required to be kept in 
readiness to protect them. The people were content 
to entrust the protection of their rights to the regu- 
larly constituted officers who were chosen for that 
purpose, but the trusts, although their members 
had an equal choice in the selection of these 
representatives, found it necessary to employ spe- 
cial attorneys to keep a constant watch upon them, 
and to use every practicable means to secure the 
enactment of laws especially favorable to the in- 
dustries in which they were engaged, and for this 
purpose money in almost unlimited quantities was 
provided. Political campaigns were no longer con- 
ducted upon economical lines, but large contribu- 
tions were regularly made by the trusts and other 
large industrial institutions, and the political par- 
ties have learned to rely upon them to meet the 
expense of campaigns in which money was to be 
used with a free hand, and also to levy assessments 
against them for that purpose. Mr. Havemeyer, 
President of the American Sugar Refining Com- 
pany, testified before the Congressional investi- 
gating committee that it was the practice of the 
Sugar Trust to contribute to the campaign funds 
of both political parties, always endeavoring to 



s 



106 Combinations, 

keep in favor with the party which was then in 
power. But these trusts do not thus liberally con- 
tribute to campaign funds unless they find it 
profitable to do so, and we find the interests of 
the Sugar Trust cared for in every tariff bill which 
has been passed by Congress since the organization 
of that trust. If the sugar trusts have found it 
profitable to contribute large sums of money to 
help pay campaign expenses of political parties in 
return for favors received from the government, it 
is altogether likely that the numerous combina- 
tions which have been recently formed will also 
find it to their interests to do the same ; and since 
these contributions are likely to be in some meas- 
ure proportionate to the ability of the concerns to 
pay, it is to be supposed that the influence of such 
combinations as the United States Steel Cor- 
poration, the capitalization of which is eighteen 
or twenty times that of the Sugar Trust, will be 
very great with any political party to which it may 
lend its support. With the political parties thus 
dependent upon trusts and combinations for their 
financial support, which they are expected to repay 
with the choicest favors that the government is 
able to bestow, it seems probable that there will 
soon be but small favors left for the people, and 
that unless great care is speedily exercised in re- 
straining the influence of combinations and monop- 
olies, they will before long be dropped entirely 
out of the consideration of the law-makers. 



Trusts and Monopolies. 107 



CHAPTER VI. 

GROWTH OF COMBINATIONS. 

Having now examined the purpose and con- 
siderations which led to the formation of combina- 
tions, the various forms of organization adopted, 
and the varied powers which may be exercised 
by them after they have been organized, let 113 
inquire a little as to what progress has been made 
in the development of combinations and ascertain 
to what degree of importance the movement has 
attained in the business world, so that we may 
be better able to determine the nature of the 
remedies or restrictions which should be applied 
to it. 

The acquisition by a few of a monopoly of the 
production or distribution of certain commodities, 
is an evil which is not peculiar to our day but 
which has appeared to oppress and exasperate the 
people at various times all through the history of 
civilization. The movement toward concentration 
and combination, however, which in its full de- 
velopment affords the most powerful, most endur- 
ing, and most effective form of monopoly, cannot 
be said to have fairly begun until about the close 
of the eighteenth century, when the factory sys- 
tem of manufacturing first began to supplant the 
shop and fireside method of production which had 



fio8 Combinations, 

supplied the wants of the people up to that time. 

The introduction into this country of the fac- 
tory, or collective, as opposed to the individual, 
method of production, proceeded very slowly until 
about the year 1850. But since that time it has 
developed with great rapidity, steadily increasing 
the number, size and capacity of the establish- 
ments until we to-day find whole communities em- 
ployed in one great factory, and the tendency 
toward the establishment of large manufacturing 
institutions, rather than a great number of smaller 
ones, has been so pronounced that, while the prod- 
ucts of manufactures have increased many times 
more rapidly than the population, the number of 
establishments has relatively diminished, and in 
some lines of industry there has been, in recent 
years, an actual decrease in the number of estab- 
lishments engaged in business. 

The figures presented by the Director of the 
Census may serve to impress this phase of factory 
Jdevelopment more forcibly upon the reader, and 
we therefore present the following extract from 
Yolume VII. of the Twelfth Census of the United 
States, p. 72 : 

"The Census figures throw some light upon the 
tendency in certain industries toward concentra- 
tion into large establishments. The industries in 
which this tendency is most striking are presented 
in Table XVII. 

"This method of presentation by averages, 
which includes all the small establishments with 
the great ones, fails to give any true conception of 
the extent to which the total value of the product 
comes from a comparatively small number of es- 



Trusts and Monopolies. 109 

tablishments, the operatives of which are numbered 
by the thousand. 

"The tendency toward concentration appears to 
be most marked in the iron and steel industry. 
The largest number of rolling mills and blast fur- 
naces was reported at the Census of 1870, when. 
726 establishments reported an average capi- 
tal of $161,523, 103 wage-earners, $54,158 
paid in wages, $274,878 worth of products. 
At the Census of 1880 the number of es- 
tablishments decreased to 699, at which 
point it stood again in the Census of 1890, 
falling still further to 668 in 1900. At the 
Twelfth Census these 668 establishments reported 
an average capital of $858,371, 333 wage-earners, 
$180,869 paid in wages, and $1,203,545 worth of 
products. During the last decade the average cap- 
ital increased 45.2 per cent, and the average prod- 
ucts 76.2 per cent. During the last half century 
the average iron and steel establishment had in- 
creased its capital eighteen fold, the number of 
wage-earners fivefold, the amount paid in wages 
twelvefold, and the value of the product twenty- 
sevenfold. 

"The manufacture of agricultural implements 
also shows a consistent decrease in the number of 
establishments since 1860, while the average size 
of the establishments has increased uninterruptedly 
since the first report. The glass industry shows 
a continuous increase in the size of establishments, 
with a general increase in their number. Leather 
and paper mills have about kept pace with each 
other in the rate of increase in the value of their 
products, but the amount of capital and the num- 



1 10 Combinations, 

ber of employees in the paper mills are greater 
than in the leather factories. The number of 
paper establishments has just held its own, while 
the number of leather establishments has actually 
decreased. 

"The size of textile establishments is notably 
larger than formerly. The number of establish- 
ments in carpets and woolen goods are somewhat 
less than during the earlier periods; in cotton 
goods there was little difference between the num- 
ber at the beginning and at the end of the half 
century period, with a minimum in 1890; while 
hosiery and knit goods, glass and silk goods have 
more establishments than at any other time during 
the half century. They have all, however, main- 
tained an almost uninterrupted growth in all the 
four items shown in the comparative table." 

The Director of the Census then proceeds to 
make this tendency toward concentration still more 
clear by dividing the manufacturing establishments 
into classes according to the number of persons 
employed, thus: the total number of factories 
proper which excludes the hand trades, is given 
as 296,440, of which number 41,687 were operated 
by the proprietors alone without the assistance of 
any employees; 125,890 employed less than five 
persons each; 79,756 employed from five to twenty 
persons each; 24,630 employed from twenty-one 
to fifty persons each; 8,494 employed from one 
hundred to two hundred and fifty persons each; 
2,809 employed from two hundred and fifty-one to 
five hundred persons each; 1,063 employed from 
five hundred to one thousand persons each, and 44$ 
employed over one thousand persons each. 



Trusts and Monopolies. in 

We believe that the full significance of this 
classification can be more forcibly brought out by 
extending the Census figures so as to present a 
comparison of the number of persons employed 
by these respective classes. To secure the figures 
necessary for this purpose we shall multiply the 
number of the establishments in each class by the 
number representing the smallest number of per- 
sons employed in it, which will give us the mini- 
mum number of persons employed in each class. 
We adopt the minimum number of persons reported 
to have been employed because the Census tables 
do not mention any limit within which an estimate 
of the number of persons employed by the class 
of establishments employing over one thousand 
persons each might fairly be confined, and any at- 
tempt, therefore, to fix upon either a maximum or 
an average number of employees for this class must 
be based solely upon conjecture which might prove 
to be very unfair to the showing of the other 
classes. The minimum number of employees of 
all classes is, on the other hand, definitely stated 
in the classification, and we prefer to accept it as 
given, believing that it will afford a means of 
comparison which will be equally fair to all. 

We then find the number of persons employed 
by the several classes to be as follows: 41,687 es- 
tablishments had no employees; 125,890 es- 
tablishments employed 125,687 persons; 79,756 es- 
tablishments employed 398,780 persons; 24,635 
establishments employed 517,335 persons; 11,663 
establishments employed 594,813 persons; 8,494 
establishments employed 857,894 persons; 2,809 
establishments employed 705,059 persons; 1,063 



H2 Combinations, 

•establishments employed 532,563 persons, and 443 
establishments employed 443,443 persons. 

From this it appears that 271,968, or ninety-one 
and seven-tenths per cent, of all the mamif acturing 
establishments reporting, employed from one to 
fifty persons each, while only 24,472, or eight and 
three-tenths per cent, of the whole number of es- 
tablishments, employed more than fifty persons 
each; but these 271,968 small establishments, or 
ninet}r-one and seven-tenths per cent, of the whole, : 
employed only 1,042,000 persons, or a trifle less 
than twenty-five per cent, of the whole number 
employed by all establishments, while the 
24,472 establishments, employing over fifty per- 
sons each, or eight and three-tenths per cent, of the 
whole, employed 3,133,772 persons, or a trifle more 
than seventy-five per cent, of the whole number of 
persons employed by all establishments. 

The evidence afforded by the foregoing figures 
of the rapid concentration of the manufacturing 
interests of the country into the hands of a few 
individuals, is further supported by the statistics 
furnished in Volume VII. of the Twelfth Census, 
relative to the form of organization adopted by in- 
dustrial establishments. In this classification, 
however, the figures include the hand trades, which, 
do not lend themselves so readily to concentration 
into large establishments as does the work of manu- 
facturing proper, and this must greatly detract 
from the showing which would be made if the hand 
trades could be excluded; but the evidence of the 
tendency toward concentration is still sufficiently 
pronounced to warrant us in calling special at- 
tention to it. Of the 512,254 establishments re- 



Trusts and Monopolies. u$ 

ported to have been engaged in manufacturing and 
mechanical industries, 372,703, or seventy-two and 
eight-tenths per cent, of the whole were owned and 
operated by individual proprietors, and produced 
$2,674,497,008 worth of .goods, or twenty and six- 
tenths per cent, of the total value of products re- 
turned for the year; 96,715, or eighteen and nine- 
tenths per cent, of the total number of establish- 
ments, were owned and operated by partnerships, 
and produced $2,565,360,839 worth of goods, or 
nineteen and seven-tenths per cent, of the whole; 
40,743, or seven and nine-tenths per cent, of the 
total number of establishments were owned and 
operated bv corporations, and produced goods 
valued at $7,733,582,531, or fifty-nine and five- 
tenths per cent, of the gross value of all products 
reported. 

Not satisfied with this rapid acquisition of so 
large a percentage of the production of the entire 
country by a comparatively few corporations, they 
have begun to combine with each other into still 
greater corporations, which are commonly known 
as combinations. And we find given, in the same 
volume of the Twelfth Census, the names of one 
hundred and eighty-five industrial combinations, 
which, in point of numbers, are less than one-half 
of 1 per cent, of the total number of manufactur- 
ing establishments controlled by corporations, but 
which produced during the census year, products 
to the value of $1,667,350,949, or twenty-one and 
five-tenths per cent, of the total production of all 
corporations. Or, in other words, these one hun- 
dred and eighty-five combinations produced more 
in one year than 232,351 manufacturing establish- 



Ii 14 Combinations, 

ments controlled by individuals produced during 
the same time ; and the average production of each 
of these combinations exceeded that of 1,254 indi- 
vidual establishments. 

The foregoing figures present the situation as 
it was in the year 1900, but these great industrial 
combinations had only just begun to assume a 
commanding position among the industrial insti- 
tutions of the country; the rush to combination 
had only fairly set in, and the situation, as out- 
lined, serves rather to indicate the possibilities of 
the future than to present anything like a com- 
plete development of the spirit of centralization 
which seems to have taken such complete posses- 
sion of the industrial world. 

As may be seen from the table of one hundred 
and eighty-five industrial combinations repro- 
duced from the Twelfth Census and printed else- 
where in this work, only five were organized prior 
to the j^ear 18891 During the next seven or eight 
years they began to increase at what was then 
thought to be an alarming rate; but from about 
the beginning of the year 1898 the tendency 
toward combination began to reach fever heat and 
to assume the proportions of an epidemic, and 
combinations and trusts began to be the all-engross- 
ing topic of conversation among all classes of so- 
ciety. The rapidity with which the number of 
combinations multiplied during the last few years 
of the nineteenth century is thus expressed by the 
Director of the Census: "The list given in Table 
XXIX. reveals the fact that sixty-five of the one 
hundred and eighty-five corporations herein treated 



Trusts and Monopolies. 115 

as industrial combinations were organized prior to 
the year 1897, and that in the years 1897, 1898, 
1899 and prior to June 30, 1900, there were or- 
ganized eight, twenty, seventy-nine and thirteen 
corporations respectively. Of the total number, 
ninety-two, or forty-nine and seven-tenths per cent, 
were chartered during the eighteen months from 
January 1, 1899, to June 30, 1900. This whole- 
sale reorganization of industry, right upon the eve 
of the taking of the present census, thrust upon 
the division of manufactures a multiplicity of prob- 
lems such as had never before confronted it/' 

This wonderful increase in the number and 
size of the industrial combinations which marked 
the closing years of the nineteenth century, has 
continued without abatement to the present time, 
and to-day there is nothing more familiar to the 
readers of our newspapers than the announcement 
of the incorporation of some new combination, and 
rumors of the formation of others are almost con- 
stantly afloat. An evidence of the degree of de- 
velopment to which combinations have attained 
since the date of the statistics already given, is 
found in the case of the United States Steel Cor- 
poration, which was chartered by the State of New 
Jersey, February 25, 1901. It was formed by a 
combination of nine of the combinations shown in 
the census table, which together controlled two 
hundred and thirty-four plants, with the Lake 
Superior Consolidated Iron Mines and the Car- 
negie Company, and has an authorized capitaliza- 
tion of $1,404,000,000. 

The magnitude of this great combination can 
perhaps be more fully appreciated when it is noted 



,n6 Combinations, 

that the capitalization of this one corporation is 
equal to thirty-eight and seven-tenths per 
cent, of the total authorized capitalization of the 
one hundred and eighty-five combinations shown in 
the census table; and its influence in the iron and 
steel industry can in some measure be imagined 
when it is remembered that the total capitalization 
of all the combinations shown by the census table 
to be engaged in the iron and steel industry was 
only $978,799,000, or only a little more than two- 
thirds of the capitalization of this one new com- 
bination, which is one of the earliest productions 
of the twentieth century. We here present a table 
taken from the sworn answer of Mr. Charles M. 
Schwab, President of the United States Steel Cor- 
poration in the case of Hodge, et al, vs. the United 
States Steel Corporation, which will serve to show 
the extent and variety of the properties held and 
controlled by this corporation. 

VALUE OF ASSETS. 

Iron and Bessemer ore properties $700,000,000 

Plants, mills, fixtures, machinery, equipment, 

tools and real estate 300,000,000 

Coal and coke fields (87,589 acres) 100,000,000 

transportation properties, including railroads 
(1,467 miles), terminals, docks, ships 
(112), equipment (23,185 cars and 428 

locomotives, etc.) 80,000,000 

Blast furnaces 48,000,000 

Natural gas fields 20,000,000 

limestone properties 4,000,000 

Cash and cash assets as of June 1, 1902 148,281,000 

Total $1,400,281,000 

The following list includes the names of the 
more important combinations organized since June 



Trusts and Monopolies. 117 

30, 1900, together with the names of about twenty 
organized during the year or two preceding that 
date, but which were omitted from the census 
table. 

The Allis-Chalmers Co., 1901 $36,250,000 

American Alkali Co., 1899 30,000,000 

American Can Co., 1901 88,000,000 

American Cigar Co., 1901 10,000,000 

American Light & Traction Co., 1901 12,127,800 

American Locomotive Co., 1901 50,412,500 

American Machine & Ordnance Co., 1902 10,000,000 

American Packing Co., 1902 20,000,000 

American Plow Co., 1902 75,000,000 

American Pneumatic Service Co., 1899 15,000,000 

American Railway Equipment Co., 1899 22,000,000 

American Sash & Door Co., 1900 7,000,000 

American Sewer Pipe Co., 1900 10,000,000 

American Steel Foundries Co., 1902 30,000,000 

Associated Merchants Co., 1901 15,000,000 

Atlantic Rubber Shoe Co., 1901 10,000,000 

A. Booth & Co., 1898 5,500,000 

Borden's Condensed Milk Co., 1S99 25,000,000 

Chicago Pneumatic Tool Co., 1902 10,000,000 

Colonial Lumber & Box Corporation, 1902.... 15,000,000 
Consolidated Railway Lighting and Equipment 

Co., 1901 17,000,000 

Consolidated Tobacco Co., 1901 262,689,200 

Corn Products Co., 1902 80,000,000 

Crucible Steel Co. of America, l'JOO 50,000,000 

Distilling Co. of America, 1899 85,000,000 

Eastman Kodak Co., 1901 35,000,000 

Electric Co. of America, 1899 20,368,400 

Electrical Vehicle Co., 1899 18,000,000 

Empire Steel & Iron Co., 1899 10,000,000 

Fairmount Coal Co., 1901 12,000,000 

Great Lakes Towing Co., 1899 5,000,000 

Harbison-Walker Refractories Co., 1902 25,750,000 

Illinois Brick Co., 1900 9,000,000 

International Harvester Co., 1902 120,000,000 

International Mercantile Marine Co., 1902 120,000,000 

International Nickel Co., 1902 120,000,000 

Jones & Laughlin Steel Co., 1902 30,000,000 

Monongahela River Cons. Coal and Coke Co., 

1809 30,000,000 

National Asphalt Co., 1900 31,000,000 

National Candy Co., 1902 9,000,00 

National Fireproofing Co., 1899 12,500,000 

New England Cotton Yarn Co., 1899 15,577,000 

New York Dock Co., 1901 28,500,000 

Pacific Hardware & Steel Co., 1902 10,000,000 

Pennsylvania Steel Co., 1901 50,000,000 

Planters Compress Co., 1899 10,000,000 



n8 Combinations, 

Quaker Oats Co., 1901 $12,000,000 

Railway Steel Spring Co., 1902 20,000,000 

Sloss-Sheffield Steel & Iron Co., 1899 22,000,000 

Standard Milling Co., 1900 17,250,000 

Standard Table Oil Cloth Co., 1901 10,000,000 

Union Steel & Chain Co., 1899 60,000,000 

United Box Board & Paper Co., 1902 30,000,000 

United Copper Co., 1902 50,000,000 

United Fruit Co., 1899 , 20,000,000 

United States Cast-Iron Pipe and Foundry Co, 

1899 25,000,000 

United States Cotton Duck Corporation, 1901 . . 30,000,000 
United States Realty and Construction Co., 

1902 66,000,000 

United States Reduction & Refining Co., 1901. 12,000,000 

United States Ship Building Co., 1902 71,000,000 

United States Steel Corporation, -1901 1,404,000,000 

Universal Tobacco Co., 1901 10,000,000 

Having now seen how completely the sources of 
production have been brought within the control 
of a comparatively few individuals, let us inquire 
to what extent have combinations been successful 
in securing control of the production of the ar- 
ticles in the manufacture of which they are en- 
gaged. From the testimony given before the In- 
dustrial Commission in 1899, we learn that at that 
time the Federal Steel Company produced thirty 
per cent, of the entire production of the class of 
goods manufactured by it ; the National Steel Com- 
pany produced eighteen per cent, of its class of 
products; the American Steel and Wire Company 
produced seventy-five to eighty per cent, of the 
entire production of steel rods and smooth wire, 
sixty-five to ninety per cent, of wire nails, and had 
an absolute monopoly of the production of barbed 
wire and woven wire fencing; the American Tin 
Plate Company produced over ninety per cent, of 
the tin plate manufactured in this country. All 
of these companies have since been absorbed by the 
United States Steel Corporation. The American 



Trusts and Monopolies. 119 

Sugar Refining Company controlled ninety per 
cent, of the entire production of refined sugar ; the 
Standard Oil Company controlled from eighty-one 
to eighty-three per cent, of the entire output of re- 
fined oil ; the Whiskey Combination controlled from 
eighty to ninety-five per cent, of the production of 
distilled spirits, and the Anthracite Coal Com- 
bination controlled ninety per cent, of the output 
of that product. 

Mr. Horace L. Wilgus, in his "Study of the 
United States Steel Corporation/' gives the follow- 
ing as the percentage of the entire output of the 
several products controlled by that corporation: 
iron ore, over fifty per cent. ; bessemer ore, ninety 
per cent. ; coke, over fifty per cent. ; pig iron, fifty 
per cent. ; steel rails, sixty-eight per cent. ; steel bil- 
lets, nearly the entire product ; structural steel, sixty 
per cent.; a large percentage of plate steel, shee f 
steel, bars, hoops and cotton ties; tin plate, over 
ninety per cent. ; steel tubes, over ninety per cent. ; 
wire rods and smooth wire, over ninety per cent, of 
each ; wire nails, over ninety-five per cent. ; barbed 
wire and woven wire fencing, an absolute monop- 
oly, and bridge and building construction, from 
eighty-five to ninety per cent. 

A combination controlling ninety per cent, of 
black merchant pipe and skelp was formed in 1899 ; 
a combination controlling from ninety to ninety- 
five per cent, of the production of starch and glu- 
cose was formed in 1897; a combination control- 
ling sixty per cent, of the production of crackers, 
etc., was formed in 1898 ; the American Can Com- 
pany is said to control eighty-five per cent, of the 
production of tin cans in the United States; the 



120 Combinations, 

American Hide and Leather Company controls 
seventy-five per cent, of the upper leather output 
of the country; the American Linseed Oil Com- 
pany controls eighty-five per cent, of the produc- 
tion of linseed oil; the American Eadiator Com- 
pany controls seventy-five per cent, of the steam 
and water heating business of the United States; 
the American Window Glass Company controls 
seventy per cent, of the output of the United 
States; the American Writing Paper Company 
controls seventy-six per cent, of the output of the 
United States ; the Otis Elevator Company con- 
trols eighty-five per cent, of the elevator business 
of the country; the Unim Bag and Paper Com- 
pany controls ninety per cent, of the paper bag 
business of the United States; the Union Box 
Board and Paper Company controls over ninety 
per cent, of the strawboard and newsboard pro- 
duced in the United States ; the United States En- 
velope Company controls ninety per cent, of the 
commercial envelopes used in the United States; 
the United States Eubber Company controls sev- 
enty-five per cent, of the output of rubber boots, 
shoes, etc., of the country; and the National Salt 
Company controls ninety-five per cent, of the salt 
output of the United States. 

We believe that these instances of leading arti- 
cles in which combinations have already acquired 
command of a controlling percentage of production, 
will suffice to show that combinations for the pur- 
pose of controlling production, are no longer mere 
creatures of fancy, or theoretical speculations as 
to future conditions; that they are not merely 
isolated cases peculiar to any one class of indus- 



Trusts and Monopolies. 121 

tries, and of interest only to the student of political 
economy, because of their novelty, or of their un- 
natural development; but that they are living 
realities which are rapidly assuming control of our 
industrial system, and which we must prepare to 
meet with adequate regulations and restrictions, 
if we do not wish to see the rights of the indi- 
vidual made subservient to the demands and power 
of combinations. 

The theory has been advanced that there is in 
every industry a certain point of maximum effi- 
ciency beyond which expansion ceases to be profit- 
able, and which will, therefore, serve as an auto- 
matic check upon the growth of combination and 
monopoly. Electric lighting plants are cited as an 
instance of the operation of this principle. 
It is said that when the capacity of the 
dynamo has once been reached, it would re- 
quire the additional outlay of an equal amount 
of capital to enable the plant to furnish a 
greater amount of light ; and that until the capac- 
ity of the new machinery was fully employed, the 
profits would not be increased materially, and 
might, for a time at least, be even less than they 
were before the expansion. It occurs to us, how- 
ever, that there are considerations, such as the pur- 
chase and distribution of supplies and equipments, 
the rent or purchase of grounds and buildings, the 
salaries of officials, the procuring of franchise, the 
construction of subways, extensions, etc., which 
might very materially affect this showing, and 
which tend to indicate that there are advantages 
to be found in combination even in this class of 
cases. 



122 Combinations, 

We are willing to admit that in the case of 
electric light and power plants, gas plants, street 
railways, and other natural monopolies upon which 
local conditions impose natural limitations to their 
power of expansion, the cost of production may not 
be reduced by combination to the same extent that 
it is in the case of manufacturing and other indus- 
trial establishments, but from the acquisition of a 
large portion of the street railway systems of Chi- 
cago, Philadelphia, Cincinnati and Indianapolis, by 
the Elkins-Widener-Whitney syndicate of Philadel- 
phia ; the control of all the available electric routes 
between Cleveland and Cincinnati, the Western 
Ohio Traction Company, the Southern Ohio Trac- 
tion Company, the Miami and Erie Traction Com- 
pany, the Cleveland, Ebyria and Western Railway, 
the Cincinnati, Dayton and Toledo Railway, and a 
number of Illinois companies, by the Pomeroy-Man- 
delbaum syndicate of Cleveland ; and the control of 
the electric lighting companies of Camden and 
Atlantic City, of New Jersey; Scranton, Altoona, 
Dunmore and Conshohocken, Pennsylvania ; 
Bridgeport and Canton, Ohio; Rockford, Illinois; 
Wheeling, West Virginia; Jamaica and Long 
Island City, Long Island; Auburn, New York, 
and other towns, by the Electric Company of 
America ; it would seem that there are inducements 
to form combination i even in this class of cases, 
and the limit to which combinations may be car- 
ried, does not yet appear to have been discovered. 

In relation to other classes of industry, however, 
the great size and enormous capacity of production 
which, as we have seen, have already been attained 
by combinations in nearly every conceivable 



Trusts and Monopolies. 123 

branch of trade, would seem to preclude the hope 
of discovering any point of maximum efficiency 
which would fall short of the point at which the 
demand for consumption ceases. 

Some years ago we might have been induced to 
believe that the direction and control of a manu- 
facturing establishment in which all the various 
processes of the production of an entire line of 
industry (such as that of iron and steel — from the 
extraction of the raw materials from the earth to 
the delivery of the finished product to the con- 
sumer), were to be conducted upon so large a scale 
as to supply the demands of eighty millions of peo- 
ple, would present difficulties which were beyond 
the capacity of any individual man to surmount; 
but the continuous evolution of our industrial 
capabilities, from the individual laborer, to the bil- 
lion dollar steel corporation, proves how useless it is 
to attempt to estimate the heights to which human 
ambition and enterprise may aspire, and the ca- 
pacity of the machinery of production appears to be 
quite as expansive as the capacity of those who de- 
sign and operate it. 

We think of no instance in the industrial field 
in which expansion of combination ceases to be 
profitable, so long as it is unrestricted in the ex- 
ercise of the powers which expansion brings within 
its control; and we have learned of no industrial 
combination dissolving because it had overreached 
the point of largest net returns. We do know, 
however, that combinations are continually grow- 
ing larger and larger. Even the United States 
Steel Corporation is steadily adding to its hold- 
ings; in December, 1902, it purchased new prop- 



1 24 Combinations, 

erties to provide for which forty-five million dol- 
lars worth of bonds were issued, and it is stated 
that negotiations are now in progress looking to 
the purchase of properties of much greater impor- 
tance; and we can rest assured that the financiers 
who are behind these great combinations would not 
keep on extending their grasp upon the industries 
of the country if they did not find it profitable to 
do so. 

It seems clear, then, that we cannot safely rely 
upon any self-interest to regulate the size or ex- 
tent of these combinations, and that, if we desire 
to place any restrictions or regulations upon their 
future development, we must do so by positive pro- 
visions of law. 

The point is made by Professor Ely that mere 
mass of capital does not necessarily lead to mo- 
nopoly, which distinction is made for .the purpose 
of indicating that towards industrial institutions 
owned either by individuals or by corporations 
which are the result either of natural 
growth or of legitimate investment, although 
they may have attained to great size, a dif- 
ferent course of procedure should be adopted from 
that which is to be pursued towards combinations 
which have manifested pronounced tendencies to 
monopoly. 

We admit that mass of capital in the hands of 
an individual does not necessarily lead to monop- 
oly, but neither does mass of capital in the hands 
of a combination necessarily lead to monopoly. We 
have shown, however, that in the nature of things, 
mass of capital in the hands of a combination does 
almost inevitably lead to the exercise of monopolis- 



Trusts and Monopolies. 125 

tic power; the same capital affords to the indi- 
vidual the same opportunities : their purposes are 
the same; the temptations are the same; the hu- 
man nature of the individuals concerned in each is 
the same, and we are forced to believe that their 
grasp at monopoly would be very much the same. 

It requires no argument to show that the smaller 
the number of persons concerned in a given matter, 
the easier it is to establish an agreement between 
them; it is equally clear that the larger the mass 
of capital and the greater the size of the establish- 
ments engaged in a given industry, the fewer there 
will be of them ; it follows then that the possession 
of large amounts of capital by individuals or cor- 
porations engaged in business, greatly simplifies 
the making of agreements, and leads readily to 
combination ; and, as we have already seen, the end 
of combination is monopoly. 

Having thus seen that the larger the establish- 
ments, the more easily can combination be ef- 
fected, it merely requires a little reflection to see 
further that the larger the establishments, the more 
willing are their proprietors to form combinations. 
This arises, in the first place, from the fact that 
the step from an independent establishment which 
controls a large percentage of the production of its 
commodities, to a combination which is to control 
nearly the whole production, is not so great as that 
from a small establishment into a great combina- 
tion; in the second place, the proprietors of large 
establishments know that they will be able to exert 
a greater amount of influence in controlling the 
affairs of the combination into which they are about 
to enter ; and in the third place, the proprietors of 



;i26 Combinations, 

large establishments are more likely to have con- 
sidered the possibilities, advantages, and opportu- 
nities of combination, than are the proprietors of 
small concerns which are so much further removed 
from the possibilities and temptations of monopoly. 

This disposition on the part of large institutions 
to combine has become so well recognized, that, 
whenever the formation of a new combination is 
announced, we at once expect to find the largest 
establishments in the industry as the leading 
movers in the combination; and when the names 
of the combining concerns are reported, it is usually 
found that they are at the head of the list. The 
smaller establishments can be forced to join the 
combination later, or be left to themselves, as the 
case may be, but the combinations are nearly al- 
ways formed and controlled by the more important 
concerns. Thus, in the formation of the United 
States Steel Corporation, it was only the largest 
iron and steel combinations which united with the 
largest steel company in the country, the Carnegie 
Company, to form the greatest industrial combina- 
tion yet known to the world. 

A more general showing of this tendency of large 
(establishments to combination, and one which has 
the advantage of being supported by governmental 
statistics, may be found from a more careful inspec- 
tion of the census figures already shown. It there 
appears that the total number of corporations en- 
gaged in manufacture and mechanical industries 
was 40,743, that of these 185 were combinations 
and controlled 2,216 plants, of which 176 were idle 
during the census year; but the remaining 2,040 
plants which were operated by the combinations, 



Trusts and Monopolies. 127 

or five per cent, of the total number of corporations 
engaged in manufacture, produced during the year 
1900, products valued at $1,667,350,949, or 
twenty-one and five-tenths per cent, of the total 
production for all corporations. 

Thus we see that the average production of each 
plant operated by the combinations, is more than 
four times as large as the average production of 
each one of the entire number of corporations en- 
gaged in manufacture; and more than one hun- 
dred and ten times as large as the average pro- 
duction of each of the manufacturing establish- 
ments operated by individual proprietors: all of 
which serves to prove that it is the largest estab- 
lishments which are most likely to combine, and 
that if we wish to restrict further combination, w r e 
must reach these large independent establishments 
as well as the combinations which have already 
been formed. 

We, therefore, contend that the same general 
method of treatment, should, so far as prac- 
ticable, be applied to great aggregations of 
capital whether held by individuals, corporations 
or combinations; believing that it is better to re- 
move the temptation and the power to do mischief, 
than merely to apply the remedy after the mis- 
chief has been done. 

But while combinations have attained to such 
magnitude and influence in the industrial world, 
have their effects been felt or recognized by the peo- 
ple? The answer to this is found in almost daily 
utterances of the press of all sections of the coun- 
try, and in the frequent references to the subject 
of trusts and combinations which are found in .the 



128 Combinations, 

public addresses of men of all classes and conditions 
of society from the President of the United States, 
members of his Cabinet, United States Sena- 
tors, Congressmen, and Governors of states, 
down to lawyers, college professors, clergy- 
men, business men, and laboring men, all 
of which denounce, in terms more or less 
severe, trusts and combinations formed for the 
purpose of controlling production and raising 
prices, and promise or demand relief from condi- 
tions which now oppress the people, and from still 
greater evils which seem to be impending over 
them. 

During the year 1900 five political parties, 
namely, the Republican party, the Democratic 
party, the non-fusion wing of the People's party, 
the fusion wing of the People's party, and the Silver 
Republican party, in their national conventions, 
adopted as part of their platforms, resolutions 
condemning trusts and combinations in restraint of 
trade, and promising to deliver the people from the 
evils and oppression of monopoly. During the same 
year, seventy state conventions adopted similar 
resolutions. 

A more general demand for the reform of any 
social or political evil can hardly be imagined than 
that which the people of this country have made 
for the regulation of industrial trusts and combi- 
nations; yet no regulations or restrictions have 
thus far been placed upon them. The conditions 
which elicited these numerous expressions of ear- 
nest solicitude from the public press, and from pub- 
lic men of all political parties and beliefs repre- 
senting all sections of the country, and which gave 



Trusts and Monopolies. 129 

rise to the general feeling of dissatisfaction result- 
ing in this unprecedented demand for reform pro- 
claimed by seventy-five State and National Conven- 
tions during the year 1900, have not been re- 
lieved, but have been growing daily more and more 
aggravating and oppressive. It would seem, there- . 
fore, that the situation is sufficiently grave to in- 
duce the thoughtful reader to seek further and en- 
deavor to find a remedy which will cure the evils 
complained of, and at the same time, secure the 
largest possible freedom to capital and labor, and 
to individuals and combinations consistent with: 
the general good of all. 



[I30 Combinations, 



CHAPTEE VII. 

LEGISLATION AND JUDICIAL CONSTRUCTION. 

Sir William Blackstone, in his commentaries 
on the laws of England, thus describes the deter- 
mined hostility of the English people to monopo- 
lies, and the laws and penalties by means of which 
the English Government sought to protect its people 
from their oppression during the eighteenth cen- 
tury. 

"The offense of forestalling the market is also 
an offense against public trade. This, which (as 
well as the two following) is also an offense at com- 
mon law, was described by statute 5 and 6 Edw. 
VI., C. 14, to be the buying or contracting for any 
merchandise or victual coming in the way of the 
market; or dissuading persons from bringing their 
goods or provisions there, or persuading them to 
enhance the price, when there : any of which prac- 
tices made the market dearer to the fair trader." 

Eegrating was described by the same statute to 
be the buying of corn, or other dead victual, in any 
market, and selling it again in the same market, 
or within four miles of the place. For this also 
enhances the price of the provisions, as every suc- 
cessive seller must have a successive profit. 

Engrossing was also described to be the getting 



Trusts and Monopolies. 131 

into one's possession, or buying up, large quantities 
of corn, or other dead victuals, with intent to sell 
them again. This must, of course, be injurious to 
the public, by putting it in the power of one or 
two rich men to raise the price of provisions at 
their own discretion. So the total engrossing of 
any other commodity, with intent to sell it at an 
unreasonable price, is an offense indictable and 
finable at the common law. And the general pen- 
alty for these three offenses by the common law 
(for all the statutes concerning them were re- 
pealed by 12 Geo. III., C. 71), is as in other mi- 
nute misdemeanors, discretionary fine and im- 
prisonment. Among the Romans these offenses, 
and other malpractices to raise the price of pro- 
visions, were punished by a pecuniary mulct. 

Monopolies are much the same offense in other 
branches of trade, that engrossing is in provisions ; 
being, a license or privilege allowed by the king 
for the sole buying and selling, making, working 
or using of anything whatever; whereby the sub- 
ject in general is restrained from the liberty of 
manufacturing or trading which he had before. 
These had been carried to an enormous height, dur- 
ing the reign of Queen Elizabeth, and were heavily 
complained of by Sir Edward Cook in the beginning 
of the reign of King James the First ; but were in 
great measure remedied by statute 21 Jac. 1, C. 3, 
which declares such monopolies to be contrary to 
law and void (except as to patents, not exceeding 
the grant of fourteen years to the authors of new 
inventions; and except, also, patents concerning 
printing, saltpetre, gunpowder, great ordnance 
and shot) ; and monopolists are punished with the 



132 Combinations, 

forfeiture of treble damages and double costs, to 
those whom they attempt to disturb ; and if they 
procure any action, brought against them for these 
damages to be stayed by any extra judicial order, 
other than of the court wherein it is brought, they 
incur the penalties of praemunire. Combinations 
also, among victuallers or artificers, to raise the 
price of provisions or any other commodities, or the 
Tate of labor, are in many cases severely punished 
by particular statutes; and in general by statute 
2 and 3 Edw. VI., C. 15, with the forfeiture of 
£10, or twenty-one days' imprisonment with an al- 
lowance of only bread and water for the first of- 
fense; £20, or the pillory, for the second; and 
£40 for- the third, or else the pillory, loss of one 
ear and perpetual imfamy. In the same manner 
by a constitution of the Emperor Zeno, all monopo- 
lies and combinations to keep up the price of mer- 
chandise, provisions or workmanship were pro- 
hibited upon pain of forfeiture of goods and per- 
petual banishment. 

Aside from monopolies which have been created 
by governmental grants, the most common means 
of securing monopolies and the most essential 
requisite to their successful operation has been the 
establishment of agreements between the persons 
engaged in the industries sought to be affected. 
In order to prevent the making of such agree- 
ments, the English courts have, during the three 
hundred years which have elapsed since the making 
of the complaint by Lord Coke, to which Mr. 
Blackstone refers, universally held that contracts 
made in general restraint of trade, are contrary 
to public policy and are, therefore, void. Combi- 



Trusts and Monopolies. 133 

nations and conspiracies in restraint of trade were 
held to be offenses indictable by common law, and 
punishable as crimes, and contracts made for simi- 
lar purposes could not be enforced in the courts. 

Many changes in the definition of the term mo- 
nopoly, and restraint of trade, of a method of en- 
forcing the laws and of the penalties imposed for 
their violation, have been made by statute since the 
days of which Mr. Blackstone wrote ; but the gen- 
eral policy of the law, in its opposition to monopo- 
lies, has remained the same. The numerous de- 
cisions of the English courts, in which this point 
has been emphasized, afford us definite and positive 
expression of the experience and wisdom of centu- 
ries, and form the basis upon which most of the 
anti-trust decisions of our state courts have been 
founded. 

In the old English case of Mitchel versus Key- 
nolds, decided in 1711, Lord Macclesfield says: 
"All total restraints of trade, which the law so 
much favours, are absolutely bad, and all the 
restraints, though only partial if nothing more 
appear, are presumed to be bad ; but if the circum- 
stances are set forth, that presumption may be 
excluded, and the courts are to judge of those cir- 
cumstances and determine whether the contract be 
valid or not. Contracts in restraint of trade in 
themselves, if nothing shows them to be reason- 
able, are bad in the eyes of the law." 

This was reiterated in the case of Mallan versus 
May, Law Journal, Vol. 12, Part 2, page 376, 
decided June 5, 1843 ; and again with slight modi- 
fication in the case of Davies versus Davies, in the 



134 Combinations, 

Court of Appeals, Law Journal Reports, Vol. 56, 
page 962. Chancery. Decided August 1, 1887. 

The common law on this point, together with the 
common law in general, became part of the heritage 
which the American colonies received from Eng- 
land, and after the revolution most of the states 
adopted it as a part of their fundamental law. 

Most of the states have also recently enacted 
what are commonly called anti-trust statutes, which 
are, for the most part, merely re-enactments of the 
common law, with the addition of various penal- 
ties for its violation, and the courts have adopted 
the precedents of the English cases in construing 
them. 

The following extracts from decisions in leading 
cases will serve to show how generally this principle 
of the common law has been recognized by our 
state courts, and how firmly it has become estab- 
lished as a part of the laws of this country. 

The Supreme Court of the State of Illinois, in 
the case of the Distilling and Cattle Feeding Com- 
pany versus the People, 156 Illinois Reports, page 
486, defines the attitude of the law in relation to 
monopolies as follows: "The trust obtained pos- 
session of nearly all the distilleries and of nearly 
the entire distillery product of the United 
States, thus enabling it to dictate prices and the 
amount of production, and to thus draw to itself 
the substantial control of the distillery business of 
the country. 

"Combinations of this character have been fre- 
quently made the subject of judicial investigation 
within the last few years, and while the proceeding 
has generally been against some one of the corpora- , 



Trusts and Monopolies. 135 

tions entering into the trust, the courts, so far as 
they have had occasion to speak on the subject at 
all, have held such trusts to be illegal. . . . 
Many other decisions of similar importance might 
be referred to but the foregoing will suffice. They 
are sufficient in our opinion, to establish the con- 
clusion, in which the courts of the country, with 
very great unanimity, seem to concur that trusts 
of the character of the one described in the infor- 
mation so existing prior to the organization of the 
defendant corporation, are against the policy of the 
law, and are therefore illegal and void. The con- 
trol exercised over the distillery business of the 
country — over production and prices — and the vir- 
tual monopoly formerly held by the trust, are in 
no degree changed or relaxed, but the methods and 
purposes of the trust are perpetuated and carried 
out with the same persistence and vigor as before 
the organization of the corporation. There is no 
magic in a corporate organization which can purge 
the trust scheme of its illegality, and it remains 
as essentially opposed to the principles of sound 
public policy as when the trust was in existence. 
It was illegal before and is illegal still and for the 
same reasons." 

The evils and dangers of trusts and monopo- 
lies are thus described by the Supreme 
Court of the State of Ohio in the case of the State 
vs. the Standard Oil Company, 49 Ohio State Re- 
ports, page 137. "Its object was to establish a 
virtual monopoly of the business of producing pe- 
troleum, and of manufacturing, refining, and deal- 
ing in it and all its products, throughout the entire 
country, and by which it might not merely control 



136 Combinations, 

the production, but the price, at its pleasure. All 
such associations are contrary to the policy of our 
state and void. . . ." 

Much has been said in favor of the objects 
of the Standard Oil Trust, and what it has ac- 
complished. It may be true that it has improved 
the quality and cheapened the costs of petroleum 
and its products to the consumer. But such is not 
one of the usual or general results of a monopoly 
and it is the policy of the law to regard, not 
what may, but what usually, happened. Experi- 
ence shows that it is not wise to trust human cupid- 
ity where it has the opportunity to aggrandize 
itself at the expense of others. ... It is true 
that in the case just cited, the monopoly had been 
created by letters patent. But the objections lie 
not to the manner in which the monopoly is cre- 
ated. The effect on industrial liberty and the price 
of commodities will be the same whether created by 
patent, or by an extensive combination, among those 
engaged in similar industries, controlled by one 
management. By the invariable laws of human 
nature, competition will be excluded and prices 
controlled in the interest of those connected with 
the combination or trust. 

The power and far reaching effects of combi- 
nations and monopolies are thus set forth by the 
Supreme Court of the State of Pennsylvania in the 
case of the Morris Eun Coal Company vs. the 
Barclay Coal Company, 68 Pennsylvania State 
Reports, page 173. 

"The effects produced on the public interests lead 
to the consideration of another feature of great 
weight in determining the illegality of the con- 



Trusts and Monopolies. 137 

tract, to wit : the combination resorted to by these 
five companies. Singly, each might have sus- 
pended deliveries and sales of coal to suit its own 
interests and might have raised the price, even 
though this might be detrimental to the public 
interest. There is a certain freedom which must 
be allowed to every one in the management of his 
own affairs. When competition is left free, indi- 
vidual error or folly will generally find a correc- 
tion in the conduct of others. But here is a com- 
bination of all the companies operating in the 
Blosburg and Barclay mining region, and con- 
trolling their entire productions. They have 
combined together to govern the supply and 
price of coal in all the markets from the 
Hudson to the Mississippi rivers, and from 
Pennsylvania to the Lakes. This combination 
has a power in its confederated form which 
no individual action can confer. The public 
interest must succumb to it, for it has left no com- 
petition free to correct its baleful influence. When 
the supply of coal is suspended, the demand for it 
becomes importunate, and prices must rise. Or if 
the supply goes forward, the price fixed by the con- 
federates must accompany it. The domestic 
hearth, the furnace of the iron master, and the fires 
of the manufactory, — all feel the restraint, while 
many dependent hands are paralyzed, and hungry 
mouths are stinted. The influence of a lack of 
supply or a rise in the price of an article of such 
prime necessity, cannot be measured. It permeates 
the entire mass of the community, and leaves few* 
of its members untouched by its withering blight. 
Such a combination is more than a contract; it 



1 



138 Combinations, 

is an offense. ( I take it/ said Gibson J., 'a com- 
bination is criminal whenever the act to be done 
lias a necessary tendency to prejudice the public 
or to oppress individuals by unjustly subjecting 
them to the power of the confederates, and giving 
effect to the purpose of the latter whether of ex- 
tortion or of mischief: — Commonwealth vs. Car- 
lisle, Brightly's Keports, 40/ In all such combina- 
tions where the purpose is injurious or unlawful, 
the gist of the offense is the conspiracy. Men can 
often do by the combination of many, what sever- 
ally no one could accomplish, and even what when 
done by one would be innocent." 

The primary effect of these and similar decisions 
has been to compel a general recognition of the fact 
that combinations in restraint of trade are viola- 
tions of the common law, and may be dissolved and 
punished by the imposition of whatever penalties 
statutes may provide. Their secondary effect has 
been to dissolve numerous combinations formed in 
various parts of the country for the purpose of 
controlling certain lines of trade. The first of 
these serves to put combinations on their guard 
lest they overreach the point of public toleration, 
and this is likely to prove more effective in re- 
straining the abuse of power by combinations in 
the future than any of the statutes which have yet 
been enacted. The second of these effects, however, 
or the dissolution of combinations which these de- 
cisions have effected, has merely served to drive 
these unlawful trusts and combinations from cover 
to cover, and most of them have continued under 
new forms of organization, to build up their mo- 
nopoly of trade in defiance of law. 



Trusts and Monopolies. 139 

It may then be asked, if it is unlawful to com- 
bine under one form of organization, why is it not 
equally unlawful to combine under any other ? To 
this we must reply, that no real distinction can be 
made; whatever is wrong under one form of or- 
ganization is equally wrong under any other, no 
matter what appearance of regularity may be 
adopted to disguise it; and if it were not for the 
division of this country into so many independent 
state governments, the application of this rule 
would be very simple, as was shown in the case of 
the Distilling and Cattle Feeding Company versus 
The People, in the Supreme Court of the State of 
Illinois: but an undue regard for the rights and 
privileges of corporations, together with a conven- 
tional respect for the acts of other states, has, in a 
measure, served to tie the hands of the courts and 
to limit their application of this general principle, 
and many offenders have thus been enabled to evade 
the law by merely assuming the garb of regularity. 

The situation which confronts the courts in this I 
matter is about as follows: most of the states, as 
has already been stated, have enacted statutes de- 
claring all pools, trusts, confederations, or combina- 
tions formed for the purpose of fixing and con- 
trolling prices or of regulating or limiting the 
production, sale, or distribution of any article of 
merchandise or other commodity, to be illegal, and 
prescribing severe penalties to be imposed upon 
those who shall be found guilty of entering into 
such combinations. Other states have not adopted 
this policy of opposition to combinations and seem 
rather to encourage the formation of just such 
combinations of capital as the majority of the states 



140 Combinations, 

are striving to prevent. When, therefore, offenders 
'against these statutes have been brought before the 
courts, many attempts have been made to enforce 
iheir provisions, and numerous combinations have 
been dissolved or seriously disabled, but they have 
in most cases immediately taken refuge under the 
laws of those states which are known to be friendly 
to their purposes, and have continued to do busi- 
ness as before, as in the case of the Distilling and 
Cattle Feeding Company of America. 

This company was declared by the Supreme 
Court of the State of Illinois to be illegal, and 
ordered to be dissolved. The members of the com- 
pany immediately sent their agents to the State 
of New York, incorporated the American Spirits 
Manufacturing Company, came back to the State 
of Illinois as a legally organized foreign corpora- 
tion, bought out the properties of the Distilling 
and Cattle Feeding Company, and proceeded to 
carry on its business in the State of Illinois just as 
before. The powers of this new corporation were 
derived from the State of New York, and the 
legality of its corporate existence could not there- 
fore be inquired into by the courts of the State of 
Illinois. The laws of the State of Illinois permit 
foreign corporations to do business within the state 
upon very easy terms, and the courts, therefore, 
found themselves helpless to interfere further with 
the affairs of this company. 

In the State of New York, the North Eiver Su- 
gar Eefining Company, one of the members of the 
Sugar Trust, was attacked in the courts of that 
state, and its participation in the trust was de- 
clared illegal, and the company ordered to be dis* 



Trusts and Monopolies. 1411 

solved. The Sugar Trust simply went into the 
State of New Jersey, incorporated the American 
Sugar Eefining Company, assumed the properties 
of the Trust, and continued to do business as of 
old, in the State of New York. 

In the State of Ohio one of the members of the 
Standard Oil Trust was brought before the Su- 
preme Court of that state, and its connection with, 
the trust was declared to be illegal, and a disso- 
lution of its relations ordered; but after defying 
the decisions of the courts of that and other states 
for a number of years, the Standard Oil Trust 
finally went into the State of New Jersey and in- 
corporated the Standard Oil Company, since which 
time it has continued to operate its plants just as 
before. 

But why, it may now be asked, do trusts and com- 
binations which have been dissolved, or which are 
about to be organized, usually go to some one of 
a certain few states to secure their articles of in- 
corporation, and frequently to states in which but 
little or none of their business is to be carried on? 
The experience of the cases just cited would seem 
to suggest one answer to this question, which is, that 
the purposes of the organization, in its trust form, 
having been declared to be contrary to the policy 
of the common law, the probabilities are that the 
courts of the same state would hold the same pur- 
poses on the part of a corporation to be equally 
obnoxious to the law, and warrant the dissolution 
of the corporation just as it had that of the trust 
or other combination ; whereas, by going for their 
charter to a state in which they have but little, or no 
business, the people of that state will have but 



I142 Combinations, 

little interest in the conduct of their affairs, and 
there will, therefore, be but slight danger of their 
legal existence being challenged on account of any 
abuse of corporate powers of which they may be 
guilty. 

A more fundamental reason, however, is found 
in the nature of our corporation laws. It has been 
the policy of the common law from the earliest 
times to resist every extension of the powers of 
associations or corporations. In the early days of 
English civilization, land was the chief source 
of wealth and power, and we therefore find among 
the first restrictions placed upon associations, stat- 
utes limiting their power to acquire and hold land. 
These statutes date as far back as the Magna 
Charta, of the ninth year of the reign of Henry the 
Third, in the year 1225, and from that time until 
the present day, restrictions upon the amount of 
real estate to be held by them, have continued to 
be one of the limitations most invariably placed 
upon the powers of corporations. 

Many changes in the manner of creating corpora- 
tions and in the regulations to be imposed upon 
them, have been made with the changing conditions 
and requirements of each successive age; but the 
same general principle seems always to have been 
kept in mind, namely, that corporations should al- 
ways be strictly limited to the exercise of those 
powers which are reasonably necessary to the dis- 
charge of the purposes of their creation. In con- 
struing these statutes in relation to corporations, 
the courts have generally borne in mind 
the popular distrust of the growth of cor- 
porate powers, and their decisions have built 



Trusts and Monopolies. 143 

up a mass of common law prescribing what 
corporations shall not do, which, in connection 
with the statutory provisions as to what they 
may do, would seem to require them to move in a 
straight and narrow way. This same spirit of an- 
tagonism, modified somewhat by experience and by 
a more general knowledge of the affairs of corpora- 
tions which has been obtained during the last half 
century, but adhering to the precedents laid down 
by the courts, and true to that innate suspicion of 
the accumulation of great power in the hands of a 
few individuals, still pervades the corporation laws 
of most of the states of this country. 

While this spirit of opposition to the extension 
of the powers of corporations has been the prevail- 
ing sentiment in the corporation laws of America 
and England for the last six or eight hundred 
years, and has only been modified in recent times 
into a feeling of vigilant toleration, there has grown 
up in some parts of this country within the last 
twenty-five or thirty years a disposition to give 
to corporations almost unrestricted powers; to al- 
low them substantially the same liberty of action 
as is enjoyed by individuals, while relieving them 
of the responsibilities and penalties to which an 
individual would be subject, and statutes extend- 
ing to corporations a large share of this freedom 
and power of action have been enacted in some of 
our states. 

Under these statutes a corporation may obtain 
a charter empowering it to carry on any or all 
of the various branches of business known to the 
business world, with a very few exceptions, such as 
banking, insurance, and the operation of certain 



144 Combinations, 

franchises, and to do all things necessary to the 
successful prosecution of these various pursuits. 
These powers may all be included in one charter, 
and under it the corporation may consolidate and 
combine with, or absorb other companies, or may 
hold and vote their stock, thus controlling their 
affairs; it may be practically unrestricted as to 
its holding of real estate, at least outside of the 
state of its creation; may issue an unlimited 
amount of bonds or other securities; may reside 
partially or wholly outside of the state of its cre- 
ation, by merely retaining a nominal office within 
its jurisdiction, and may escape many liabilities 
and restraints to which the directors of corpora- 
tions are ordinarily subjected. Many of these priv- 
ileges are denied to corporations by the laws of 
most of our states, and we therefore find a great 
number of the very large corporations and com- 
binations going for their articles of incorporation 
to the State of New Jersey, and other states and 
territories which have patterned after its laws, 
no matter in what states their business may be 
located. 

We shall not attempt to determine what were 
the controlling motives which induced the growth 
of this unprecedented liberality which has made 
the State of New Jersey so conspicuous as the 
home of great corporations. Whether the 
people of that state have been more progres- 
sive in their views or have been more sen- 
sible to the progressive spirit of the age, which 
may have seemed to demand the adoption of a more 
liberal policy toward corporations; or whether the 
business interests of the state seemed to require 



Trusts and Monopolies. 145 

that greater powers be given to corporations in 
order to enable them to meet the requirements of 
the industrial world, the control of which was so 
rapidly concentrated into their hands ; whether the 
people wished to attract a larger share of the busi- 
ness of the country into their state; or whether 
for the sake of the fees to be obtained for the sale 
of corporate charters, they were willing to prey 
upon the business interests of their sister states, 
and to enable large aggregations of capital to defy 
the laws of the states in which their business was 
actually situated and carried on, we shall not at- 
tempt to say. There are, however, a few points 
which serve to make the prominence of this state 
as a refuge for large corporations appear par- 
ticularly remarkable. 

New Jersey is not the largest state in the 
Union in any respect. In point of population 
it ranks sixteenth in size; in regard to its 
agricultural products it ranks as thirtieth 
among the states, and as a manufacturing 
state it takes sixth place; while as an in- 
corporator of combinations and large corporations 
it far surpasses all the other states. Of the one 
Tiundred and eighty-five industrial combinations 
reported by the Twelfth Census, and reproduced 
elsewhere in this volume, one hundred and one 
were incorporated in the State of New Jersey, 
seventy-six were distributed among nineteen or 
twenty other states, and eight of the number were 
incorporated under the laws of England. 

Some idea of what percentage of the corpora- 
tions incorporated under the New Jersey laws are 
actual bona fide residents of that state may be 



U46 Combinations, 

derived from an inspection of the census table just 
referred to, from which it appears that of the 
one hundred and one combinations incorporated 
in the State of New Jersey, only four reported to 
the Director of the Census that their central or 
principal offices were located in that state, while 
ninety-seven reported that their offices were situ- 
ated at points in other states. 

It is true that the laws of New Jersey provide 
that every corporation incorporated in that state 
shall maintain a principal office within the state, 
but this requirement is complied with by merely 
maintaining a nominal agency at some point 
within the state, at which certain books are kept, 
but where no real business is transacted. It will 
be readily understood how complete a sham this 
fiction of maintaining a principal office within 
the state is, when it is known that several trust 
companies within the state make a special business 
of organizing non-resident corporations, and of 
maintaining their principal offices for them. One 
of these companies alone claims, in its advertising 
circular, to represent over two thousand corpora- 
tions, so it can easily be imagined how much real 
business it would be capable of conducting for 
each one of them. 

These companies advertise all over the country 
the advantages afforded by the New Jersey laws. 
They agree to furnish resident incorporators in 
order to organize corporations for any purpose or 
purposes that may be desired; to fill out and sign 
all necessary applications, and to take out all 
papers necessary to complete organization; to hold 
all necessary meetings, to keep the necessary 



Trusts and Monopolies. 147 

books, to hold the annual meetings of stockholders 
which are required to be held within the state; 
all of this without the presence of a single stock- 
holder, and finally to insure the corporation against 
all liabilities and penalties under the laws of that 
state. In short, they propose to organize, equip 
and deliver to the customer a complete working 
corporation endowed with exceptional powers and 
privileges, and that without a member of the new 
corporation ever having put his foot within the 
state, or subjected himself to its jurisdiction. Yet 
this appears to be accepted by the courts as a com- 
pliance with the laws of the state. 

The fees derived from the issuing of charters to 
this multitude of corporations have, however,, 
proved to be the source of a very considerable 
revenue to the state, and have greatly reduced the 
rate of taxation. The people of that state have, 
therefore, received some direct benefit as the result 
of their liberality toward corporations, and it is- 
easy to understand why they might favor the ex- 
tension of the trade in corporation charters, re- 
gardless of what the effect might be upon the busi- 
ness interests of other states. 

Whatever may have been the motives which in- 
spired the framers of the corporation laws of New 
Jersey, whether they were selfish and narrow, or 
as generous and broad as their effects have been 
far-reaching, the fact remains that they have revo- 
lutionized corporation life in this country. A large 
majority of the states still adhere to the old form 
of strict corporation laws, but the promoters of 
corporations understand perfectly well that when- 
ever they desire to secure greater freedom of cor- 



H48 Combinations, 

porate powers than the laws of the state in which, 
they are doing business afford, they have merely 
to apply to the State of New Jersey or to some 
other state having similar laws, for a charter em- 
powering them to do almost anything that they 
might wish to do. 

The anti-trust statutes adopted by most of the 
states, and designed to prevent the formation of 
pools, trusts and agreements for the control of 
prices and the regulation of production, have been 
successful in driving these aggregations of capital 
from one form of organization to another, until 
they at last found refuge and protection in the 
form of great corporations, or what might very ap- 
propriately be termed, foreign corporations, for 
they are usually foreign to all states in which their 
business is conducted. The development of this 
idea of a foreign corporation has rendered the old 
forms of trusts, pools and working agreements,; 
much less desirable means of forming combina- 
tions, and the statutes directed against them have 
therefore lost much of their value as a means of 
protection to the rights of the people. 

In order to place some restriction upon the 
powers of these foreign corporations, some states 
have enacted provisions requiring all foreign cor- 
porations desiring to do business within their 
limits to file a copy of their charter or certificate 
of incorporation with the Secretary of State or 
other official, to become subject to the general cor- 
poration laws of the state, and declaring that they 
shall exercise no other or greater powers within 
its jurisdiction than are conferred upon the domes- 
tic corporations of the state. These provision^ 



Trusts and Monopolies. 149 

though they may at first sight appear to be amply 
sufficient to restrain the powers of these corpora- 
tions within the state, have fallen wholly short of 
their purpose. The plants operated by these cor- 
porations within the state are usually found to be 
mere ministerial branches, exercising no executive 
powers, operated in obedience to orders received 
from the board of directors, the members of which 
are usually found to reside in some other state, and 
the result has been an utter failure to check them 
in any essential particular. 

An illustration of this class of cases is found in 
the case of the American Spirits Manufacturing 
Company, which owns and operates a number of 
distilleries in the State of Illinois as well as in 
-other states. This company is incorporated under 
the laws of the State of New York, but ninety 
per cent, of its stock is owned by the Distilling 
Company of America, which is a New Jersey cor- 
poration, and which therefore controls its affairs. 
We then have a distillery operated at Peoria, Illi- 
nois, but its supplies are purchased and its products 
distributed by the American Spirits Manufactur- 
ing Company of New York, under the direction 
of the Distilling Company of America, of New 
Jersey. 

Perhaps the most convincing evidence of the 
failure of these restrictive provisions to accom- 
plish their purpose is found in the steady and rapid 
increase in the number and power of these foreign 
corporations. If these corporations found them- 
selves restricted in any considerable number of 
states to the exercise of those powers and privileges 
which are enjoyed by domestic corporations, and 



150 Combinations, 

which is the end these statutes were intended to 
secure, it would be useless for them to go to New 
Jersey or elsewhere to procure the grant of powers 
which they would not be allowed to exercise. There 
would soon be a perceptible falling off in the num- 
ber of organizations seeking charters in foreign 
states, but their number is steadily increasing, and 
we are therefore forced to conclude that they must 
find but very little hindrance to the exercise of 
these extraordinary powers for which they seek 
the aid of foreign states. 

It would seem, then, that the several states 
should either adopt some drastic measures to com- 
pel these foreign corporations to abandon their 
extraordinary powers, or should revise their own 
laws so as to allow to domestic corporations a de- 
gree of latitude in keeping with the demands of the 
age, and should endeavor to agree upon some uni- 
form provisions for their regulation and control. 
It certainly seems absurd to see corporations going 
to one state to secure their grant of powers, and 
then going into other states to exercise them. It is 
a burlesque upon our form of government. 

The reason of the restrictions which the com- 
mon law and the statutory laws of most of our 
states have thrown about corporations, is that it 
has always been believed that if too much freedom 
of action were to be allowed to corporations they 
would soon become so powerful as to be a menace 
to the interests of the public, and destructive of 
the rights of individual competitors. If experi- 
ence has shown the correctness of this position to 
be still well founded, and it has been found im- 
practicable to restrain these foreign corporations 



Trusts and Monopolies. ijfl 

by imposing regulations upon their branches within 
the state, there would seem to be no good reason 
why they should not be absolutely prohibited from 
doing business within the state, so far at least as 
such business does not become a part of interstate 
commerce, for every state has the right to protect 
the interests of its own people by all measures 
which do not interfere with the powers which are 
granted to the national government by the Con- 
stitution of the United States, and no state has 
any right to grant a license to any individual or 
corporation to do any act, or exercise any powers 
within the limits of any other state, which are not 
tolerated by the laws of that state, or which it is 
bound to respect. 

In view of the many changes which have taken 
place in the condition of society and in the man- 
ner of doing business, and in the light of the 
numerous experiments which have been made in 
the exercise of extensive powers by corporations, if 
it appears that greater powers and freedom of ac- 
tion are necessary to enable corporations to meet 
the legitimate requirements of the business of to- 
day, and that it can be safely granted to them 
without sacrificing the rights of the public or of 
the individual, it would seem to be the part of wis- 
dom for the states to revise their laws, and to 
grant to corporations whatever measure of free- 
dom the industrial development of the country 
may seem to demand. An effort should also be 
made to secure uniformity in the corporation laws 
of the several states, for in that way, not only 
would the powers, privileges, penalties and im- 
munities of corporations become more generally 



1 52 Combinations, 

•understood, but corporations would then secure 
their charters from the state in which they intend 
to do business and in which their property is lo- 
cated, and there would cease to be displayed that 
disposition to seek to secure the extreme limit of 
power which must always result from an undue 
restriction on the one hand and an over-indulgence 
on the other. But we shall speak further of this 
when we come to the consideration of remedies. 

The difficulties attending the regulation of trusts 
and combinations by the several states, early led to 
an appeal to the national government to take the 
matter in hand, and in obedience to the popular 
demand, Congress, in the year 1890, passed what 
is commonly known as the Sherman Anti-Trust 
'Act. 

As is generally understood, the Government of 
the United States is limited to the exercise of 
those powers which are granted to it by the Con- 
stitution of the United States, and in order to 
secure its action in any given matter, the subject 
must be brought fairly within the scope of some 
one of these powers. Trusts, pools and combina- 
tions among railway companies were a direct in- 
terference with interstate commerce, and had been 
provided against by the establishment of the Inter- 
state Commerce Commission in 1887, but the com- 
binations now complained of were chiefly among 
manufacturers, and there is nothing in the Con- 
stitution of the United States which directly gives 
to Congress any control whatever over manufac- 
tures. 

The clause of the Constitution which provides 
that Congress shall have power to regulate com- 



Trusts and Monopolies. 1^3 

merce with foreign nations and among the several 
states, and with the Indian tribes, has been con- 
strued to include the power to levy tariff duties 
for the sole purpose of affording protection to do- 
mestic manufacturers, but this has been justified 
chiefly on the grounds of expediency, because the 
levying of duties was one of the usual means of 
regulating commerce ; because it had been custom- 
ary under English law, before the adoption of the 
Constitution, to levy duties for the protection of 
domestic industries; because the power to afford 
such protection to manufactures or other industries 
had been taken away from the states by the Con- 
stitution, and because it was believed that the 
framers of the Constitution had intended that such 
powers should be exercised by Congress. There is 
no other power enumerated in the Constitution 
from which the right of Congress to interfere with 
combinations of manufacturers can possibly be de- 
rived. If it has the right to act in the matter at 
all, its authority to do so must be found in rela- 
tion to the interstate commerce clause of the Con- 
stitution. 

It was, therefore, considered that these combina- 
tions would most likely enter into agreements which 
would, in one way or another, interfere with inter- 
state commerce, and upon this theory the Sherman 
act was founded. It prohibits the making of agree- 
ments of any kind in restraint of interstate com- 
merce, believing that by thus restricting the power 
of combinations to regulate interstate trade they 
would be shorn of the choicest fruits of their un- 
lawful combinations, and that they would therefore 
soon begin to disappear. 



154 Combinations, 

"Chapter 647. — An act to protect trade and com- 
merce against unlawful restraints and monopolies, 
July 2, 1890. Be it enacted by the Senate and 
House of Kepresentatives of the United States of 
America in Congress assembled. 

"Section 1. Every contract, combination in the 
form of trust or otherwise, or conspiracy, in re- 
straint of trade or commerce among the several 
states or with foreign nations, is hereby declared 
to be illegal. Every person who shall make any 
such contract or engage in any such combination 
or conspiracy shall be deemed guilty of a misde- 
meanor, and, on conviction thereof, shall be pun- 
ished by a fine not exceeding $5,000, or by im- 
prisonment not exceeding one year, or by both said 
punishments, in the discretion of the Court." 

The succeeding sections are merely amplifica- 
tions of this, together with the provision of penal- 
ties for its violation, and prescribing the manner 
of its enforcement. The consideration of this 
statute derives special importance from the fact 
that it marks the utmost extent to which Congress 
has yet gone in this direction. 

It will be noticed that this act does not at- 
tempt to assume any incidental or implied power 
under the section of the Constitution relating to 
the regulation of interstate commerce. It merely 
provides that no trust or combination shall be 
formed or agreement made in restraint of inter- 
state commerce ; or, in other words, that there shall 
be no interference with that which Congress has 
been given express power to regulate. It does not 
attempt to lay hold of the subject matter of manu- 
facture, of agriculture, of mining, or even of com- 



Trusts and Monopolies. 155 

merce within the bounds of a state ; it merely pro- 
vides that there shall be no interference with the 
free flow of commerce between the several states. 
The scope of the Anti-Trust Act, and the powers 
of Congress under the third clause of section eight, 
of article one, of the Constitution of the United 
States, which provides that Congress shall have 
power to regulate interstate commerce, are very 
fully considered by the Supreme Court of the 
United States in the case of the United States 
versus B. C. Knight Company, 156 United States 
Eeports, page 1, in which attention is drawn to 
the distinction between commerce and manufac- 
ture, and to the importance of observing the point 
at which the jurisdiction of the state ends and that 
of the United States begins. The elements com- 
prehended in the term commerce are clearly de- 
fined, and the dangers and far-reaching conse- 
quences of the National Government ever attempt- 
ing to assume control of those who may be engaged 
in manufacturing or otherwise producing articles 
designed for interstate commerce, are very forcibly 
set forth. Chief Justice Fuller, speaking for the 
Court in that case, says: "The argument is that 
the power to control the manufacture of refined 
sugar is a monopoly over a necessary of life, to 
the enjoyment of which, by a large part of the 
population of the United States, interstate com- 
merce is indispensable, and that, therefore, the 
general government in the exercise of the power to 
regulate commerce may repress such monopoly di- 
rectly and set aside the instruments which have 
created it. But this argument cannot be con- 
fined to necessaries of life merely, and must in- 



156 Combinations, 

elude all articles of general consumption. Doubt- 
less the power to control the manufacture of a 
given thing involves in a certain sense the control 
of its disposition, but this is a secondary and not the 
primary sense; and although the exercise of that 
power may result in bringing the operation of com- 
merce into play, it does not control it, and affects 
it only incidentally and indirectly. Commerce 
succeeds to manufacture, and is not a part of it. 
The power to regulate commerce is the power to 
prescribe the rule by which commerce shall be 
governed, and is a power independent of the power 
to suppress monopoly. But it may operate in re- 
pression of monopoly whenever that comes within 
the rules by which commerce is governed, or when- 
ever the transaction is itself a monopoly of com- 
merce. 

"It is vital that the independence of the commer- 
cial power and of the police power, and the de- 
limitation between them, however perplexing, 
should always be recognized and observed, for, 
while the one furnishes the strongest bond of 
union, the other is essential to the preservation of 
the autonomy of the states as required by our 
dual form of government; and acknowledged 
evils, however grave and urgent they may appear 
to be, would better be borne than the risk be run, 
in the effort to suppress them, of more serious con- 
sequences, by resort to expedients of even doubtful 
constitutionality. 

"It will be perceived how far-reaching the 
proposition is that the power of dealing with a 
monopoly directly may be exercised by the general 
government whenever interstate or international 



Trusts and Monopolies. 157 

commerce may be ultimately affected. The regula- 
tion of commerce applies to the subjects of com- 
merce, and not to matters of internal police. 

" Contracts to buy, sell, or exchange goods to be 
transported among the several states, the trans- 
portation and its instrumentalities, and articles 
bought, sold or exchanged for the purposes of such 
transit among the states or put in this way of 
transit may be regulated, but this is because they 
form part of interstate trade or commerce. The 
fact that an article is manufactured for export to 
another state does not of itself make it an article 
of interstate commerce, and the intent of the manu- 
facturer does not determine the time when the ar- 
ticle or product passes from the control of the state 
and belongs to commerce 

"If it be held that the term includes the regu- 
lation of all such manufactures as are intended to 
be the subject of commercial transactions in the 
future, it is impossible to deny that it would also 
include all productive industries that contemplate 
the same thing. The result would be that Con- 
gress would be invested, to the exclusion of the 
states, with the power to regulate, not only manu- 
factures, but also agriculture, horticulture, stock 
raising, domestic fisheries, mining — in short, every 
branch of human industry. For is there one of 
them that does not contemplate, more or less 
clearly, an interstate or foreign market ? Does not 
the wheat grower of the Northwest, or the cotton 
planter of the South, plant, cultivate and harvest 
his crop with an eye on the prices at Liverpool, 
New York and Chicago ? The power being vested 
in Congress and denied to the states, it w T ould 



1158 Combinations, 

follow as an inevitable result that the duty would 
devolve on Congress to regulate all of these deli- 
cate, multiform and vital interests — interests which 
an their nature are and must be local in all the de- 
tails of their successful management." 

In this ease the Court held that in order to come 
within the provisions of the Sherman Anti-Trust 
'Act, a contract must directly, not incidentally or 
collaterally, affect interstate commerce, and though 
the contract in question was an agreement by which 
a sugar refinery which had heretofore been an ac- 
tive competitor of the Sugar Trust, was to become 
consolidated with the trust ; and though some por- 
tion of its products would undoubtedly eventually 
become a part of interstate commerce, yet the Court 
held that this did not bring the case within the pro- 
visions of the statute, and that the Court had no 
jurisdiction in the matter. 

The fact that contracts must directly, and not 
merely incidentally or collaterally, affect interstate 
commerce in order to come within the provisions 
of the statute, was again emphasized in the Su- 
preme Court of the United States by Justice Peck- 
ham, in the case of the Addyston Pipe & Steel 
Company versus the United States, 175 United 
States Eeports, page 211, as follows: 

"Under this grant of power to Congress, that 
>body, in our judgment, may enact such legislation 
as shall declare void and prohibit the performance 
of any contract between individuals or corpora- 
tions, where the natural and direct effect of such 
a contract will be, when carried out, to directly, 
and not as a mere incident to other and innocent 



Trusts and Monopolies. 159 

purposes, regulate to any substantial extent inter- 
state commerce." 

While the Sherman Anti-Trust Act is generally 
considered to be the limit to which Congress has 
gone in the exercise of its power to regulate inter- 
state commerce, and undoubtedly is the highest 
exercise of that power which has yet been attempted 
in relation to measures of general application, there 
is an exception to be found in the case of the Act 
of March 2, 1895, entitled, "An Act for the Sup- 
pression of Lottery Traffic through National and 
Interstate Commerce and the Postal Service, Sub- 
ject to the Jurisdiction and Laws of the United 
States," 28 Stat,, 963. 

The purpose and effect of the act is to ex- 
clude a specific article — lottery tickets — from in- 
terstate commerce for reasons which appear to be 
•in no way related to that commerce; and it thus 
marks a distinct departure in the exercise of Fed- 
eral powers. 

The constitutionality of the act was not con- 
tested until the year 1899, when proceedings were 
begun under it by the Federal authorities in the 
State of Texas against one C. F. Champion, charg- 
ing him with sending lottery tickets by express 
from some point in that state to a point in the 
State of California. An appeal was taken, and 
the case went to the Supreme Court of the United 
States, where it was heard at the October term, 
1902, and the opinion sustaining the validity of 
the act was filed February 23, 1903. The title 
of the case now is Champion versus Ames, United 
States Marshal, and may be found in the 188th 
United States Keport, page 321. 



160 Combinations, 

Four of the justices dissented from the finding 
of the Court, only five concurring in it, and this, 
together with the importance of the subject in- 
volved, the new and radical character of the pro- 
visions of the act, and the far-reaching conse- 
quences which might be supposed to follow from the 
establishment of such a precedent, all serve to mark 
it as a decision worthy of our most careful con- 
sideration. After discussing the various elements 
which go to make up commerce, and making an ex- 
haustive review of the decisions which have estab- 
lished the meaning of that term as used in the 
Constitution of the United States, with which we 
are not now concerned, but from which it found 
that lottery tickets, when carried from state to 
state, properly constitute an article of interstate 
commerce, the Court continued in part as follows : 

"But it is said that the statute in question does 
not regulate the carrying of lottery tickets from 
state to state, but by punishing those who cause 
them to be so carried, Congress in effect prohibits 
such carrying ; that in respect of the carrying from 
one state to another of articles or things that are, 
in fact, or according to usage in business, the sub- 
jects of commerce, the authority given Congress 
was not to prohibit, but only to regulate. This 
view was earnestly pressed at the bar by learned 
counsel and must be examined. 

"It is to be remarked that the Constitution does 
not define what is to be deemed a legitimate regu- 
lation of interstate commerce. In Gibbons versus 
Ogden it was said that the power to regulate such 
commerce is the power to prescribe the rule by 
which it is to be governed. But this general obser- 



Trusts and Monopolies. 161 

vation leaves it to be determined, when the ques- 
tion conies before the court, whether Congress, in 
prescribing a particular rule, has exceeded its 
power under the Constitution. While our govern- 
ment must be acknowledged by all to be one of 
enumerated powers (McCullough versus Maryland, 
4 Wheat., 316, 405, 407), the Constitution does not 
attempt to set forth all the means by which such 
powers may be carried into execution. It leaves 
to Congress a large discretion as to the means that 
may be employed in executing a given power. 'The 
sound construction of the Constitution/ this court 
has said, 'must allow to the national legislation 
that discretion, with respect to the means by which 
the powers it confers are to be carried into execu- 
tion, which will enable that body to perform the 
high duties assigned to it, in the manner most 
beneficial to the people. Let the end be legitimate ; 
let it be within the scope of the Constitution, and 
all means which are appropriate, which are plainly 
adapted to that end, which are not prohibited, but 
consist with the letter and spirit of the Con- 
stitution are constitutional/ lb., 421. 

"If a state, when considering legislation for the 
suppression of lotteries within its own limits, may 
properly take into view the evils that inhere in the 
raising of money, in that mode, why may not Con- 
gress, invested with the power to regulate com- 
merce among the several states, provide that such 
commerce shall not be polluted by the carrying of 
lottery tickets from one state to another? In this 
connection it must not be forgotten that the power 
of Congress to regulate commerce among the 
states, is complete in itself, and is subject to no 



162 Combinations, 

limitations except such as may be found in the 
Constitution 

"As a state may, for the purpose of guarding 
the morals of its own people, forbid all sales of 
lottery tickets within its limits, so Congress, for 
the purpose of guarding the people of the United 
States against the 'widespread pestilence of lot- 
teries' and to protect the commerce which concerns 
all the states, may prohibit the carrying of lottery 
tickets from one state to another. 

"That regulation may sometimes appropriately 
assume the form of prohibition is also illustrated 
by the case of diseased cattle, transported from one 
state to another. Such cattle may have, notwith- 
standing their condition, a value in money for some 
purposes, and yet it cannot be doubted that Con- 
gress, under its power to regulate commerce, may 
either provide for their being inspected before 
transportation begins, or, in its discretion, may 
prohibit their being transported from one state 
to another 

"The act of July 2, 1890, known as the Sher- 
man Anti-Trust Act, and which is based upon the 
power of Congress to regulate commerce among the 
states, is an illustration of the proposition that 
regulation may take the form of prohibition. The 
object of that act was to protect trade and com- 
merce against unlawful restraints and monopolies. 
To accomplish that object, Congress declared cer- 
tain contracts to be illegal. That act, in effect, 
prohibited the doing of certain things, and its pro- 
hibitory clauses have been sustained in several cases 
as valid under the power of Congress to regulate 
interstate commerce 



Trusts and Monopolies. 163 

"Then followed the passage by Congress of the 
act of August 8, 1890, 26 Stat. 313, C. 728, pro- 
viding 'that all fermented, distilled or other intoxi- 
cating liquor or liquids transported into any state 
or territory, or remaining therein for use, con- 
sumption, sale or storage therein, shall upon arrival 
in such state or territory be subject to the opera- 
tion and effect of the laws of such state or terri- 
tory enacted in the exercise of its police powers, to 
the same extent and in the same manner as though 
'•such liquids or liquors had been produced in such 
state or territor} r , and shall not be exempt there- 
from by reason of being introduced therein in orig- 
inal packages or otherwise/ That act was sus- 
tained in the Eahrer case as a valid exercise of the 
power of Congress to regulate commerce among the 
states. . . . 

"Thus under its power to regulate interstate 
commerce, as involved in the transportation in 
original packages, of ardent spirits from one state 
to another, Congress, by the necessary effect of the 
act of 1890 made it impossible to transport such 
packages to places within a prohibitory state and 
there dispose of their contents by sale ; although it 
had been previously held that ardent spirits were 
recognized articles of commerce and, until Con- 
gress otherwise provided, could be imported into a 
state, and sold in the original packages, despite 
the will of the state. If at the time of 
the passage of the act of 1890, all the states 
had enacted liquor laws prohibiting the sale of in- 
toxicating liquors within their respective limits, 
then the act would have had the necessary effect 

to exclude ardent spirits altogether from commerce 



1 64 Combinations, 

among the states ; for no one would ship, for pur- 
pose of sale, packages containing such spirits 
to points within any state that forbade their sale 
-at any time or place, even in unbroken packages, 
and in addition, provided for the seizure and for- 
feiture of such packages. So that we have in the 
Eahrer case a recognition of the principle that the 
power of Congress to regulate interstate commerce 
may sometimes be exerted with the effect of ex- 
cluding particular articles from such commerce. 

"It is said, however, that the principle that in 
order to suppress lotteries carried on through inter- 
state commerce, Congress may exclude lottery 
tickets from such commerce, leads necessarily to the 
conclusion that Congress may arbitrarily exclude 
from commerce among the states any article, com- 
modity or thing, of whatever kind or nature, or 
however useful or valuable, which it may choose, 
no matter with what motive, to declare shall not be 
carried from one state to another. It will be time 
enough to consider the constitutionality of such 
legislation when we must do so. The present case 
does not require the Court to declare the full ex- 
tent of the power that Congress may exercise in 
the regulation of commerce among the states. . . . 

"The whole subject is too important, and the 
questions suggested by its consideration are too dif- 
ficult of solution to justify any attempt to lay 
down a rule for determining in advance the valid- 
ity of every statute that may be enacted under the 
commerce clause. We decide nothing more in the 
present case than that lottery tickets are subjects 
of traffic among those who choose to sell or buy 
them; that the carriage of such tickets by inde- 



Trusts and Monopolies. 165 

pendent carriers from one state to another is there- 
fore interstate commerce; that under its power to 
regulate commerce among the several states, Con- 
gress, subject to the limitations imposed by the 
Constitution upon the exercise of the powers 
granted, has plenary authority over such commerce, 
and may prohibit the carriage of such tickets from 
state to state ; and that legislation to that end, and 
of that character, is not inconsistent with any lim- 
itation or restriction imposed upon the exercise of 
the powers granted to Congress." 

The second part of the opinion of the Court was 
devoted entirely to the discussion of the right of 
Congress, under its power to regulate interstate 
commerce, to prohibit the carrying of any particu- 
lar article in commerce between the states, for 
reasons not directly connected with that commerce. 
It held that lottery tickets might be so excluded 
from interstate commerce, but expressly declined 
to affirm any broader rule or to indicate what might 
be held in the case of a similar provision applied 
to any other article. The foregoing extracts, it is 
believed, present the principal grounds upon which 
this part of the decision was founded. In the dis- 
senting opinion in the case the justices avoided any 
extended discussion of the constitutional questions 
involved and dissented from the finding of the 
Court upon the grounds that lottery tickets do not 
form a part of interstate commerce, but in view 
of the apparent importance of the decision in rela- 
tion to the exercise by Congress of powers such as 
we have been considering in this chapter, it is be- 
lieved that a few remarks concerning it will not be 
out of place at this time. 



1 66 Combinations, 

We shall examine only that part of the opinion 
which deals with the power of Congress to exclude 
articles from interstate commerce. It should be 
remembered, then, that Congress possesses no 
powers except those granted to it by the Constitu- 
tion of the United States, and those which are 
necessary to carry them into effect ; and that every 
act of Congress, therefore, to be declared consti- 
tutional, must be brought fairly within the scope 
of some one of these expressed powers. The act 
in question was clearly intended to be understood 
as an exercise of its power to regulate commerce 
among the states, and no attempt has been made 
to justify it upon any other grounds. Let us see 
if it has been shown to fall fairly within the legiti- 
mate exercise of that power. The court repeats the 
language of Chief Justice Marshall to the effect 
that the power of Congress to regulate commerce 
among the states in plenary, is complete in itself, 
and that the power to regulate such commerce is 
the power to prescribe the rule by which it is to be 
governed. It then remarks that these general 
observations leave it to be determined when the 
question comes before the Court whether Congress, 
in prescribing a particular rule, has exceeded its 
power under the Constitution. The general state- 
ment that Congress has complete power to regu- 
late interstate commerce is, then, not to be ac- 
cepted as sufficient to justify the enactment of the 
regulation in question, unless it can be shown to 
come within the true intent and purpose of the 
power. 

The Court then says : "As a state may, for the 
purpose of guarding the morals of its own people, 



Trusts and Monopolies. 167 

forbid all sales of lottery tickets within its limits, 
so Congress, for the purpose of guarding the peo- 
ple of the United States against the widespread 
pestilence of lotteries and to protect the commerce 
which concerns all the states, may prohibit the 
carrying of lottery tickets from one state to an- 
other." The states undoubtedly have the power 
to suppress the sale of lottery tickets within their 
bounds, but no one ever thought of classing their 
right to do so as an incident to their power to regu- 
late domestic commerce. Lottery tickets are car- 
ried from point to point within the state as well as 
from state to state, and if the right to suppress 
the traffic in them cannot properly be considered as 
an incident to the power of the state to regulate 
domestic commerce, it is difficult to understand 
how it can more properly be brought within the 
power of Congress to regulate commerce among 
the several states. 

The power of the states to regulate or suppress 
lotteries and to prohibit traffic in their tickets, is a 
part of their police powers. The Federal govern- 
ment possesses no powers except those which have 
been delegated to it by the states, and as no police 
powers have ever been granted to it, except as to 
the territories and the District of Columbia and 
other territory over which it has been given ex- 
clusive jurisdiction, it follows that it cannot regu- 
late or suppress lotteries by virtue of the same right 
under which they are controlled by the states. 

It is then asked, "If a state, when considering 
legislation for the suppression of lotteries within, 
its own limits, may properly take into view the evils 
that inhere in the raising of money in that mode, 



1 68 Combinations, 

why may not Congress, invested with the power 
to regulate commerce among the several states, 
provide that such commerce shall not be polluted 
by the carrying of lottery tickets from one state 
to another?" 

Commerce is not a governmental function; it is 
essentially a private occupation, which is enjoyed 
by virtue of the natural right of every individual 
to exchange his products for those of other men, 
and exists independently of governmental pro- 
vision or support. Congress has not been given the 
power to engage in commerce among the states, 
nor to prohibit such commerce, but merely to regu- 
late it, and that for the purpose of preserving 
and encouraging it and of protecting it against un- 
just and discriminating legislation by the states 
and undue interference by private individuals. 
Commerce is not an instrument of government 
which may be used or restricted at the pleasure of 
the administration, but it is a private right which 
may be required to be so exercised as to allow the 
greatest freedom and opportunity to all. 

The regulation, then, is clearly intended to be 
for the benefit of commerce, and we are led to in- 
quire, does the carrying of lottery tickets from 
state to state in any way affect interstate com- 
merce? Does the carrying of lottery tickets have 
any more injurious effect upon commerce than the 
transportation of newspapers, dry goods or other 
articles ? We think not, and must, therefore, con- 
clude that there is no interest of interstate com- 
merce which demands that the carrying of lottery 
tickets shall be forbidden. 

The statute prohibiting the shipment of diseased 



Trusts and Monopolies. 169 

cattle in interstate commerce is then cited as an 
instance in which congressional regulation has 
taken the form of prohibition of particular ar- 
ticles. The placing of cattle having contagions 
or communicable diseases, for shipment in com- 
merce would be likely to infect all other cattle 
with which they come in contact, and thus be di- 
rectly injurious to the rights of other shippers. A 
regulation, therefore, which forbade the transpor- 
tation of such cattle, would be directly for the good 
of commerce and so within the power of Congress 
to prescribe. 

The Sherman Anti-Trust Act is then referred to 
as an instance of the power of Congress to forbid 
the doing of certain things in relation to inter- 
state commerce. The Court, however, then repeats 
the words of Justice Peckham to the effect that a 
contract to be prohibited must directly and not as 
a mere incident to other and innocent purposes, 
regulate to any substantial extent interstate com- 
merce. 

Do lottery tickets or the carrying of them in any 
way directly relate to interstate commerce? If 
they do, they will come within the principle of the 
last two cases, but if not, we must look further. 

The traffic in alcoholic liquors is next mentioned 
as a further example of the power of Congress 
to exclude articles from interstate commerce. The 
regulation of the liquor traffic and of the trans- 
portation of lottery tickets appears to be precisely 
the same in principle, the states have power to 
regulate both, and they alike come within the po- 
lice power of government to protect the health and 



170 Combinations, 

morals of its people. If, then, the Federal Govern- 
ment has power to control one it has the other. 

The Court then proceeded to show that Con- 
gress has never attempted to regulate the liquor 
traffic, but that it has, on the contrary, placed the 
entire matter within the control of the states by 
providing that all liquors imported into any state 
shall become subject to its jurisdiction in the same 
manner and to the same extent as though they 
were produced therein. It is said that if all the 
states were to exercise the power secured to them 
by that act, and prohibit the production or sale 
of such liquors within their limits, the effect woul$ 
be to exclude an article from interstate commerce 
as completely as is now done by the act in question. 

The difference between the two cases is just that 
which exists between the doing of a thing oneself 
and the having it done for one without his consent. 
It is the distinction between a republic and a mon- 
archy, between a government by the people and a 
government from a throne. The states possessed 
the undoubted right to regulate the liquor traffic 
within their limits, and Congress, in effect, merely 
provided that interstate commerce should not be 
used as a means of defeating that power. If, then, 
all of the states were to enact laws forbidding the 
production or sale of liquor, the prohibition w r ould 
be of their own making, whereas, if a number of 
the states did not adopt such provisions, and Con- 
gress were to prohibit the carrying of liquors ini 
interstate commerce, it would be an infringement 
of the rights of the citizens of these states to ex- 
change their products with one another and with 
foreign nations; for if all of the states but one 



Trusts and Monopolies. 171 

were to enact prohibitory laws, that one would still 
have the right to export its products to foreign 
countries, and to import such liquors if it desired 
to do so. Congress did not exclude liquors from 
interstate commerce, and the circumstances seem to 
suggest no greater reason for its doing so in the 
case of lottery tickets. 

The Court dwelt upon the widespread evils of 
lotteries, but the gravity of the evil affords no jus- 
tification for the usurpation of powers. The in- 
adequacy of any other power to deal with the evil 
is also suggested, but the regulation of the liquor 
traffic, which the Court so fully explained, affords a 
sufficient answer to this point. Make lottery 
tickets subject to state jurisdiction as soon as 
brought within its limits, and you place the whole 
matter completely under state control. 

Finally, the test of constitutionality laid down 
by Chief Justice Marshall is cited: "Let the end 
be legitimate, let it be within the scope of the 
Constitution, and all means which are appropriate, 
which are plainly adapted to that end, which are 
not prohibited, but consist with the letter and 
spirit of the Constitution, are constitutional." 

"Let the end be legitimate, let it be within the 
scope of the Constitution." By legitimate is meant 
lawful, or within the recognized power of the gov- 
ernment to act. It is also meant that the end shall 
be legitimate for the particular government in 
question, for many things might be perfectly legiti- 
mate for State action which would not be so for 
the National Government, and vice versa. 

What, then, is the end sought to be accomplished 
by the act in question ? It is entitled "An Act for 



H72 Combinations, 

the Suppression of Lotteries," etc.; the language 
employed in it clearly indicates the intention of 
its framers to restrict and discourage lotteries, 
and the Court, speaking of its provisions, says: 
"If the carrying of lottery tickets from one state 
to another be interstate commerce, and if Congress 
is of opinion that an effective regulation for the 
suppression of lotteries, carried on through such 
commerce, is to make it a criminal offense to cause 
lottery tickets to be carried from one state to an- 
other," etc. The purpose of this legislation, then, 
is the suppression of lotteries. Is that end within 
the scope of the Constitution of the United States ? 
Does it come fairly within the purpose of any one 
of the enumerated powers conferred upon Con- 
gress by that instrument ? Or does the still broader 
purpose to which the suppression of lotteries 
may be said to contribute, the protection of the 
public morals, come within the scope of the Fed- 
eral Constitution? We think not. That comes 
within the police power, and Congress has never 
attempted to exercise police power except in rela- 
tion to territory over which it had exclusive and 
unlimited jurisdiction. The power to regulate lot- 
teries or to protect the public morals has nowhere 
been expressly granted to Congress, and whatever 
may be said of the right to use its power to regu- 
late interstate commerce as a means to that end, 
it seems like a stretch of the imagination to believe 
that the power to protect the public morals was 
intended to be included in the grant of power to 
regulate commerce among the states. The end, 
then, not being within the scope of the Constitu- 
tion, according to the rule of Chief Justice Mar- 



Trusts and Monopolies, 173 

shall, the legislation which seeks to secure it must 
be unconstitutional, and the mere possession of 
powers which might be used for that purpose is of 
no avail. 

We have now reviewed the several grounds sug- 
gested by the Court upon which the right of Con- 
gress to exclude certain articles from commerce 
among the states might be founded, but we fail to 
discover any convincing reason for basing it upon 
any one of them. We think it safe to predict, 
then, that in view of the exhaustive review of the 
subject made in this case, and the great uncertainty 
in which the right of Congress to act appears to 
be enshrouded, even in a case in which morality 
and popular opinion seem to unite in demanding 
such action, this decision will not establish a prece- 
dent which will be likely to lead to any extension 
of this power of Congress so as to affect other ar- 
ticles of commerce in which no moral questions are 
involved. 

One of the principal points made clear by all 
these decisions is that interstate commerce is the 
subject which Congress has power to regulate, and 
that it cannot be used as a pretext for interfering 
with any other subjects, no matter how closely, 
they may be allied to it. Speaking on the same 
subject, Mr. Tucker, in his work on the Constitu- 
tion, after reviewing the decision of Chief Justice 
Marshall in the case of Gibbons versus Ogden, 
says: "It may be remarked that the power of 
Congress is not to regulate persons and things, but 
merely commerce in them." 

It has recently been suggested by some persons 
high in authority, whose opinions on such subjects 



174 Combinations, 

are deserving of the most careful consideration, 
that the power of Congress to regulate combina- 
tions and monopolies has not yet been exhausted. 
They assert that the power to regulate it in- 
volves the power to prescribe regulations as 
to who may engage in interstate commerce, 
and upon what conditions they may do so; 
that combinations may therefore be required to 
procure a license from the United States Govern- 
ment before their products can be transported from 
state to state, and that suitable restrictions may 
be imposed upon them before such license shall be 
issued. 

But what use do combinations make of inter- 
state commerce, 'with which Congress would have 
the power to interfere? They cannot travel to 
and fro as individuals do; there is no thought of 
interfering with the right of individuals to go and 
come at pleasure, whether they be the officers or 
agents of combinations or monopolies, or merely 
engaged in private business. It must therefore be 
the transportation of their products, and that 
alone, which is to be relied upon to bring these 
combinations within the supposed right of control 
by Congress. 

But the Supreme Court of the United States has 
already declared that the mere transportation of 
goods produced by a combination from one state 
to another, or the enhancement of the price of any 
commodities which are intended to be so trans- 
ported, or the suppression of the manufacture or 
production of articles the transportation of which 
has heretofore constituted an important item of in- 
terstate commerce, does not constitute such an in- 



Trusts and Monopolies. 175 

terference with commerce among the states as to 
warrant Congress in assuming control of the man- 
ufacture or production of these articles. In the 
case of the United States versus the E. C. Knight 
Company it was admitted that some part of -the 
products of the Sugar Trust, with which the de- 
fendant company was combining, would undoubt- 
edly become a part of interstate commerce, and 
that the price of such products would in all prob- 
ability be raised by the trust, which would tend to 
diminish the volume of interstate commerce; but 
this was held to be an indirect result of the trust 
agreement, the real object of which was to control 
the refining of sugar, and Congress was held to 
have no power to interfere in the matter. 

In making the point so clear that the power of 
Congress (under this clause of the Constitution) 
to assume jurisdiction over any class of cases de- 
pends upon their interference with, restriction of, 
or obstruction to, interstate commerce, and not 
upon their use of, or relation to it, the Court would 
seem to have anticipated any attempt that might 
be made to legislate further upon the subject, and 
to have declared it to be of no avail. 

We have already shown Chief Justice Fuller's 
statement of some of the evils which would be likely 
to result from any attempt on the part of th<£ 
national government to regulate the manufacture 
or production of those articles which are intended 
for interstate commerce, and an attempt to say 
who may or may not engage in interstate com- 
merce would be equally far reaching in its effects. 
As was said in Colonial days, the right to take a 
penny implies the right to take a pound; so the 



176 Combinations, 

right to assume jurisdiction over combinations be- 
cause of their participation in interstate commerce 
would imply the right to assume jurisdiction over 
individuals who have anything to do with inter- 
state commerce; and since commerce includes the 
carrying of passengers as well as that of merchan- 
dise, and includes the passengers carried as well as 
the carrying of them, it is clear that there would 
soon be but very little left for the states to retain, 
jurisdiction over. 

The power to regulate commerce among the sev- 
eral states was given to Congress by the Constitu- 
tion for the purpose of preserving the freedom of 
that commerce, and not to be used as a means of 
extending the powers of Congress so as to include 
the regulation of every other industry with which 
commerce may come in contact. If the power to 
regulate commerce among the several states can 
be extended in this manner, there would seem to 
be no good reason why the power to establish post 
offices and post roads could not be extended so as 
to include the regulation of the business of all 
those who make use of the mails; and instead of 
being a government of clearly defined enumerated 
powers, we would then have a government exercis- 
ing very general and far reaching powers, and the 
boasted sovereignty of the individual states in 
local affairs would soon cease to be more than an 
idle dream. 



Trusts and Monopolies. 177 



CHAPTER VIII. 

QUASI-PUBLIC MONOPOLIES. 

It is customary for writers upon the law of cor- 
poration to divide civil corporation, or those which 
are engaged in business or in the conduct of public 
affairs into two general classes, namely, public cor- 
porations and private corporations. j 

In public corporations are included all govern- 
mental bodies, municipalities, etc., while private 
corporations comprise all those which are organ-! 
ized for individual purposes. 

A distinction is also made between those corpo-j 
rations which are devoted to strictly private busi-, 
ness and those which, though organized by private 
persons, are engaged in the discharge of some duty 
or service which is necessary to the comfort, safety 
or convenience of the public, and over which,' 
therefore, it is said to possess certain rights of con- 
trol. This distinction has also been strongly em-j 
phasized by the decisions of the courts, and the 
latter class has been termed quasi-public corpora-j 
tions. 

We then have three classes of corporations — pub-] 
lie, private, and quasi-public corporations. 

Eecent writers upon the subject of monopolies 
have, among other classifications, also divided their 



178 Combinations, 

subject into the two general classes, public monop- 
olies and private monopolies. This classification 
of monopolies corresponds exactly with the classi- 
fication of corporations, public monopolies includ- 
ing all organized portions of the government, and 
private monopolies comprising all those organized 
or secured for private purposes. As the courts, in 
their efforts to apply the law to private corpora- 
tions, have found it necessary to subdivide them 
into two classes, according to the public or private 
nature of their employment, it would seem that 
private monopolies, which have to do more directly 
with the subject matter of the employment than* 
with the form of organization, should be subdi- 
vided in the same manner. Or, in other words, if 
certain employments contain peculiarities which 
require that corporations engaged in them shall be 
distinguished from other private corporations and 
subjected to special treatment and regulation, it 
would seem that they must contain elements which 
require special consideration and which therefore 
constitute them a class distinct from other branches 
of business or kinds of employment. This third 
class of monopolies we shall term quasi-public 
monopolies. 

We then have three classes of monopolies — pub- 
lic, private and quasi-public monopolies — corre- 
sponding precisely to the three classes of civil cor- 
porations. 

Inasmuch, then, as the great majority of combi- 
nations, trusts and monopolies of all kinds are rap- 
idly assuming the corporate form of organization, 
and those which are not are engaged in the same 
general line of pursuits, and subject to the same 



Trusts and Monopolies. 179 

conditions, we wish the reader to bear constantly in 
mind the close relationship which exists between 
this classification of monopolies and that of cor- 
porations. It will help him to recognize the neces- 
sity and wisdom of adopting for the regulation of 
combinations and trusts, principles which are gen- 
eral in their nature and alike applicable to all 
cases falling within that class, and will afford him 
the experience and wisdom of the law as a warrant 
for making a distinction between the two classes 
of monopolies and for adopting radically different 
methods of treatment for each. 

Numerous sub-classifications of monopolies have 
also been made, based upon the form and nature of 
their organization and the character of the busi- 
ness in which they are engaged, but it is not our 
purpose to enter into an analysis of the details 
pertaining to the operation of each specific branch 
of industry. We merely wish at this time to en- 
deavor to determine upon a few general principles 
the application of which would promote the devel- 
opment of the whole industrial system, and for this 
purpose the three general classes, public, private 
and quasi-public monopolies, will suffice. 

With public monopolies which relate merely to 
the subdivisions of the government we have noth- 
ing to do in this work, and as we have thus far de- 
voted ourself exclusively to the consideration of 
private monopolies, we shall now turn our atten- 
tion to the consideration of quasi-public monopo- 
lies, and of the treatment of combinations and 
trusts which have for their purpose the control of 
what are termed public utilities, such as railways, 
telegraphs, telephones, canals, street railways, etc., 



180 Combinations, 

all of which fall within this classification of our 
subject. 

By a quasi-public monopoly we mean the sub- 
stantially exclusive right to discharge some duty 
or service to the public which is possessed by pri- 
vate persons, either as individuals or corporations, 
but over which the public retains certain powers of 
control, such as the right to regulate the service, to 
fix the charges, etc. In considering this branch of 
the subject, therefore, we should always keep in 
mind the rights of both parties, the public on the 
one hand, and the private individuals or corpora- 
tions whose time and capital are invested on the 
other. Since the rights of the parties appear to 
interweave more intricately in relation to this 
class of employment than in any other known to 
the law, it is clear that we should first thoroughly 
understand the nature and origin of the rights 
which we are now about to examine, if we hope to 
avoid confusion in our attempt to adjust their re- 
lations to each other. 

The rights of the public arise from the very or- 
ganization of civil society. They grow out of the 
obligation which society has assumed to protect 
each and all of its members in the possession of 
property, and "in the enjoyment of life, liberty and 
the pursuit of happiness." These rights and obli- 
gations may be few and simple in primitive so- 
ciety, but they multiply and become more complex, 
comprehensive and far reaching as society becomes 
more highly developed and the social requirements 
become numerous and exacting. 

Public highways were early recognized as one of 
the first requisites for the promotion of intercourse 



Trusts and Monopolies. 181 

among the inhabitants of civilized communities, 
and in order to protect the whole people in the full 
enjoyment of them, free from molestation or in- 
terference of any kind, they were placed in charge 
of the government. 

The right of organized government thus to con- 
trol the streets in towns and the highways through- 
out the country is generally admitted. It is the 
almost universal practice among civilized nations, 
and there would seem to be no difference in princi- 
ple, whether the highway extends merely from 
town to town, from state to state, or from ocean 
to ocean, or whether it be made of clay, wood, 
stone, or of steel. The right of government to 
control highways intended for the general use of 
pedestrians, equestrians, bicycles, and vehicles pro- 
pelled by horse, gas, compressed air, electricity, 
steam, or other forms of power, is everywhere con- 
ceded, and that though they may extend from one 
end of the continent to the other. The right to 
control navigable lakes and rivers, which are Na- 
ture's highways, has never been disputed. What 
distinction, then, should be made because of the 
fact that the roads be constructed of asphaltum, of 
granite blocks, or of steel rails? The purposes 
and ends of the road are identical, the people are 
entitled to the same protection in making use of it, 
and the government is under the same obligation ' 
to afford that protection to them. 

Every right that a government possesses arises 
out of some duty which it owes to its people. Thus 
the government denies to its subjects the right to 
carry arms, which deprives them of the means of 
being at all times ready to repel assault or to en- 



1 82 Combinations, 

force redress of other wrongs, and ii therefore as- 
sumes the obligation to protect them against mo- 
lestation or injury. It is equally bound to afford 
this protection, whether the people be walking on 
the sidewalk or riding on a railway train, and is 
therefore endowed with all rights necessary for 
that purpose. Government denies to individuals 
the right to cross grounds or otherwise trespass on 
private property, and it is therefore bound to af- 
ford them a safe and suitable highway upon which 
they may be protected in passing through the 
country, and it possesses all rights and powers es- 
sential to that end. 

In speaking herein of governmental control, we 
liave not meant to refer to any particular branch 
or division of the government, for the public 
rights and obligations of which we have spoken 
pertain equally to all, so far as the subject matter 
lies within their particular jurisdiction, and it will 
serve equally well to illustrate our point, whether 
we have in mind a general Government, as a State 
or Nation, or one or all of its subdivisions, as in 
the case of highways which become successively 
subject to the jurisdiction of township after town- 
ship, extending over perhaps the entire width of 
the country. 

Among other subjects of public concern which, 
have imposed additional duties upon government, 
and have therefore conferred certain rights of con- 
trol, are bridges, which always have to be con- 
structed under governmental authority, and have 
usually been retained under its exclusive control. 
Water-works have been required to supply the peo- 
ple of the towns with water, and in order to oper- 



Trusts and Monopolies. 183 

ate these pipes were required to be laid through 
the public streets, which, as we have seen, have 
been vested in the town government. The towns 
have therefore been obliged either to construct the 
water-works themselves or to grant to private per- 
sons or corporations the right to make use of the 
streets for that purpose; but the granting of these 
rights would be the giving to private persons the 
use of public property for the purpose of affording 
certain services to the people, and the government 
cannot thus escape its duty to see to it that proper 
services are rendered, and to regulate them both as 
to quality and price. 

Gas and electric light plants, street car service, 
telephones, telegraphs, the postal system, elevators, 
warehouses and other public utilities all fall with- 
in this same class and impose similar rights and 
obligations upon the government. The education 
of children, the care of the sick, and the protection 
of the poor, the feeble and the helpless are also 
subjects of public concern, and impose duties upon 
the government which have generally been recog- 
nized and complied with, more or less satisfactorily, 
by the establishment of schools, the erection of hos- 
pitals, and the maintenance of asylums and homes 
of various kinds. 

Thus we see that when society requires indi- 
viduals to submit to the will of the majority in all 
matters in which their actions or property inter- 
ests become intimately involved with, or appear to 
conflict with, the rights of their fellow citizens, it 
assumes the duty of regulating these matters and 
of protecting the people in the free and full enjoy- 
ment of all those rights and privileges which the 



184 Combinations, 

laws of civilized society have guaranteed to its 
members, and in order to discharge these duties it, 
in the form of organized government, assumes 
control of all property of every kind which is re- 
quired to be used in common or for the public 
good, and acquires the right to do all things neces- 
sary to the complete discharge of the obligations 
which it has assumed. 

It is not intended, in this review of the growth 
of governmental powers, to depict the successive 
steps by which any community or government has 
actually attained to the full possession of those 
powers which enable it to command the obedience 
and respect of its citizens, and for certain pur- 
poses to exercise absolute control over the lives and 
property of its people ; but it does in effect present 
the course of development through which all gov- 
ernments have passed. Instead of progressing by 
clearly defined steps from the acquisition of one 
power to that of another, it is true that this devel- 
opment has been an almost imperceptible move- 
ment onward along many lines at the same time; 
there has been no deliberate assumption of new 
and distinct powers marking successive epochs in 
the development of the functions and scope of the 
government of to-day, but rather a gradual un- 
dertaking of a little here and a little there, without 
any consideration of the extent to which these 
small beginnings would ultimately lead, or the im- 
portant part which these small duties so naturally 
assumed were to play in controlling the affairs of 
civilized society. By thus tracing the development 
of a few individual functions of government from 
their origin to their present advanced stage of per- 



Trusts and Monopolies, 185 

ifection, it is believed that the true nature of the 
rights and obligations which they entail will be 
jnore clearly understood. 

Let us now for a few moments turn our atten- 
tion to the rights and privileges of the individual 
members of society. Among the earliest public 
employments to which private individuals devoted 
their services were stage lines, which were estab- 
lished for the purpose of carrying the mails and 
of conveying passengers and freight to and fro. 
These lines were owned and operated by private in- 
dividuals, who invested large sums of money in 
them, and they frequently proved to be very profit- 
able investments. In the course of time, however, 
as the country became more generally populated, 
and with the advent of the steam locomotive, rail- 
roads began to supersede the stage lines and to 
drive them out of business. Their proprietors 
complained grievously of the injustice that 
w r as being done them by the establishment of 
the railroads, the loss of the occupations they had 
followed for so many years, and the practical de- 
struction of their property by rendering it useless 
for the purpose for which it was intended. They 
took no account of the fact that their properties 
may have repaid them several times the amount 
which they had originally invested in them, or 
that the business had afforded them a remunera- 
tive occupation during such time as they had fol- 
lowed it. They merely knew that they were in 
possession of a highly profitable business which 
was about to be wrested from them, and past profits 
count for but little when w r e are contemplating 
present or future losses ; but the new and superior 



186 Combinations, 

accommodation afforded by the railroads prevailed, 
just as the more useful and progressive institutions 
of advancing civilizations always will, even though 
the interests of those who have built up and sup- 
ported the institutions of the past and present 
must be sacrificed in their wake. 

As the work of opening highways throughout the 
country progressed large rivers were encountered 
to be crossed, and in the absence of bridges this 
could only be done by the use of boats. Boatmen 
early began to devote their time to the operation 
of ferries for the transportation of freight and pas- 
sengers across these rivers. Many of these ferries 
have continued in operation throughout several 
generations, and although subjected to certain gov- 
ernmental regulations, as to charges, to provide for 
the safety of passengers, etc., they have always been 
owned, operated and recognized as private prop- 
erty. But as a demand for open and unobstructed 
highways became more pressing, the cities, towns 
or counties in which these ferries were located in 
many instances constructed bridges across these 
streams, thus driving the ferries out of business, 
just as the railroads had done with the stage coach. 
The capital invested in these ferries was likewise 
sacrificed, and it is to be supposed that their pro- 
prietors did all in their power to oppose the con- 
struction of bridges, but the public recognized it 
to be the duty of the government to provide high- 
ways suitable and adequate to the needs of the 
community, and its right to adopt any or all means 
suitable or essential to that end, even though the 
interests of individuals might suffer in the transi- 
tion from the old forms to the new. 



Trusts and Monopolies. 187 

The public was aware of the fact that the ferry- 
men had been discharging a service for which they 
had received compensation, and which it had a 
perfect right at any time to undertake to discharge 
for itself, in the same, or in any other way. In 
most cases ferrymen have been required to procure 
a license before being allowed to pursue their busi- 
ness. They have been subjected to official inspec- 
tion, they are obliged to serve the whole public 
without discrimination, and they collect their fees 
from the people at rates which have been prescribed 
by law. In short, they have virtually been in the 
service and pay of the public, and to dispense with 
■their services by the construction of a bridge or 
otherwise is no more unjust than it is to discharge 
a clerk who has for many years been employed in 
the county clerk's office but whose services are no 
longer required. The ferryman would have no 
more right to set up the claim of vested interest 
in the continuation of the ferry than the man who 
might be appointed to swing the bridge would have 
to claim property rights in that occupation. 

The fact that a ferryman brings his property 
into the service of the public, together with his 
personal services, does not alter the principle in the 
least. It is just the same as when a man engages 
to work with his team of horses for the city — he 
will simply receive a larger salary than qne who 
merely drives a team which belongs to the city or 
does other work of the same kind. So the ferry- 
man is presumed to receive a greater amount of 
compensation in consideration of the amount of 
capital which he had invested in the property 
which he employs in the service. 



1 88 Combinations, 

The crowded condition of the population, and 
the erection of buildings covering practically every 
available foot of ground in the congested portions 
of large cities, renders it impracticable to obtain a 
supply of water from private wells as in the less 
thickly populated districts of the country. This 
makes it a necessity, as well as a convenience, to 
draw the water supply from a distant point for dis- 
tribution. In order to do this, it becomes neces- 
sary to conduct the water through the city by 
means of pipes laid in the streets, and since it is 
also required to make provision for the laying of 
sewer and gas pipes, electric light and power wires, 
telegraph and telephone wires, cables, street car 
tracks, trolley wires, and perhaps pneumatic tubes 
and other services, all in the same street, it follows 
that whoever first secures the privilege of laying 
water pipes through the streets would have a prac- 
tical, if not an absolute, monopoly of that service. 

As we have before remarked, the streets belong 
to the public, or its representative, the govern- 
ment. No one, therefore, can undertake to furnish 
water or other public service of that character to 
the people of a city without first obtaining author- 
ity from the city government to exercise rights 
and powers which have been intrusted to it for the 
protection and interests of the people. 

A public water service is an absolute necessity 
of city life, and the city government controls the 
only avenues through which this service can be 
supplied. If, then, no private parties were to come 
forward and offer to supply this want it would 
seem unquestionably to be the imperative duty of 
the city government to supply it; but if, on the 



Trusts and Monopolies. 189 

other hand, private parties did offer to provide this 
service, it would indicate that large profits are ex- 
pected to be derived from the business, and would 
appear to afford an additional reason why the serv- 
ice should be rendered by the government itself. 
If, however, the government grants to private in- 
dividuals or corporations the privilege of supplying 
water to the people of the city, it still retains its 
full share of responsibility to the people, not only 
to see that water is supplied, but to protect them 
from imposition and injustice of every kind as to 
price, quality, quantity and manner of service. If, 
then, the relationship of the water company to the 
city government be analyzed it will be found that 
it occupies precisely the same position as did the 
ferryman whose relations to the municipality hav- 
ing immediate jurisdiction over him we have just 
described at some length. That is to say, the gov- 
ernment owes it as a duty to the people to provide 
an efficient supply of water, but instead of doing 
so directly itself it permitted a private company to 
do so for it. Thus the water company became the 
agent of the government, and might be dealt with 
just as any other employee. 

It may be that the employment might be fixed 
by the franchise for a definite number of years, 
but that does not affect the relationship. The 
relation of the parties is that of employer and em- 
ployee, and so long as a private company continues 
to devote time and capital to a public service, it 
should be regarded as a servant of the government, 
and be presumed to have undertaken the risks and 
liabilities of the employment. A laboring man 
who works for small wages is held by the common 



190 Combinations, 

law to have assumed all the ordinary hazards of 
the business in which he is employed ; and though 
he may become permanently disabled, or even lose 
his life through the carelessness or negligence of 
a fellow servant, he and his family are wholly 
without redress and must bear their loss as best 
they can. Or, if an individual who has received 
no special privileges from the government in- 
vests a hundred thousand dollars in a plant for 
the manufacture of bicycles, and the following 
year the bicycle is superseded by the automobile^ 
or the demand for bicycles otherwise decreases 
to such an extent as to render the business an 
entire failure, there is nothing left for him but 
to bear his loss in silence, and to make the best of 
a bad bargain. Why, then, should any greater 
consideration be shown for a corporation which has 
devoted its time and property to a public service 
upon conditions which it had carefully considered 
in advance, and from which it has almost invari- 
ably reaped a rich harvest? 

The development of modern civilization has 
made gas and electric lights, street car service, the 
telephone and the telegraph quite as much a ne- 
cessity of city life as is the supply of water. Since 
these can only be supplied through the use of the 
same public streets through which, as we have just 
seen, the water must be conducted, and as this use 
of the streets involves the exercise of precisely the 
same powers and privileges which we have just de- 
scribed in connection with the granting of fran- 
chises to water companies, it follows that the same 
conditions, rights and obligations which pertain to 
the operation of the public water service are equally 



Trusts and Monopolies. igi 

applicable to each of these several branches of 
the public service, whether they be supplied di- 
rectly by the government or by private individuals 
or corporations; but as we have already described 
them with some degree of detail, it is unnecessary 
to repeat our observations here. 

One of the most fundamental principles of or- 
ganized society is to secure to every individual the 
right to engage in whatever business or employ- 
ment he may select, and to pursue his happiness 
according to his own wishes, providing that he 
does not interfere with the right of any other citi- 
zen to do the same. This means that in the exer- 
cise of those rights in which he conflicts with the 
rights or interests of no other man, the individual 
is supreme, and the only relation which govern- 
ment bears to him is to protect him in the free and 
full enjoyment of them; but whenever the rights 
of two or more private persons conflict they are 
obliged to yield to the rules which the government 
has prescribed for the regulation of such cases. 
Thus if a person in the exercise of his right to 
travel the public highways free from all unneces- 
sary interference or molestation chooses to keep to 
the left-hand side of the road, and another exercis- 
ing the same right, but traveling in the opposite 
direction, resolves to keep to the right-hand side 5 it 
is evident that a collision will most likely occur- 
These individuals, then, are in these cases required 
to subordinate their own wishes to the expressed 
will of the public and to obey the law of the roads 1 
by keeping to the right. 

It follows from the provision that no individual 
shall interfere with the rights of any other that no 



192 Combinations, 

person shall claim or acquire any exclusive rights 
in property, powers, privileges, duties or occupa- 
tions in which a number of individuals or the 
whole public are equally interested. In * those 
cases, then, in which the interests of the public are 
directly affected by the discharge of the duty, serv- 
ice, employment or business, the rights of the 
public are paramount, and those of the individual 
become a matter of mere secondary importance. 
Thus a public highway is a public necessity, and 
its preservation is a matter which directly affects 
the interests of the entire community. Every citi- 
zen is entitled to make free use of it in common 
with all other members of the community for cer- 
tain purposes and in the manner prescribed by 
law; but no individual will be permitted to erect 
his house upon or otherwise to appropriate any 
portion of it to his own private use. 

The fact that the appropriation by a private in- 
dividual to his own use of a portion of the public 
highway or of certain rights or privileges in it, 
is for the purpose of affording some service to a 
large number of persons or even to the entire com- 
munity, does not in any way affect his rights to 
do so. In either case he is a mere trespasser upon 1 
public property and he has no more right to place 
any obstruction upon it, or to attempt to exercise 
control over any portion of it, than he has to 
enter upon or to attempt to exercise the same rights 
over the private property of an individual. The 
public may choose to grant to certain private per- 
sons or corporations the right to use a portion 
of the public highway or to exercise certain privi- 
leges in it for the purpose of affording certain. 



Trusts and Monopolies. 193 

services or conveniences to the community, but 
their right to exercise these privileges is derived 
solely from the grant or franchise which they re- 
ceived from the government, and is in no way 
dependent upon or influenced by the amount of 
capital which they may have invested in the con- 
struction or preparation of these highways, or in 
private properties which they have placed under, 
over, or upon them, or in a business which may be 
entirely dependent upon the exercise of these privi- 
leges. No amount of investment of capital by a 
stranger in the private property of an individual 
will give him a right to claim any interest in it 
as against the true owner, and it is just the same 
with the property of the public. 

We may then sum up the situation briefly as fol- 
lows: In those employments in which no public 
property is employed and in which no governmental 
powers are exercised the rights of the individual 
are supreme, so long as they are not used in such 
a manner as to interfere or impair the rights of 
any other person; and the government has no 
right to interfere with him except in those cases in 
which it becomes necessary to take private property 
for the use of the public, and then only upon con- 
ditions which secure to the owner full value in re- 
turn for the property taken and compensation for 
any further injury he may have sustained. The gov- 
ernment is, in these cases, further bound to protect 
private persons in the free and full enjoyment of 
their rights and is, in effect, the servant of the in- 
dividual. 

In those cases, however, in which public prop- 
erty is employed, in which powers and privileges 



194 Combinations, 

belonging solely to the government are required to 
be exercised, and in which the interests of the 
whole community are directly affected, the rights 
of the public are superior to every other considera- 
tion, and the private individual or corporation who 
devotes his time or property to such an employ- 
ment becomes merely the agent of the government, 
and as such he can claim no rights in the property 
of his principal. 

Much interest has recently been manifested in 
the discussion of the granting of perpetual fran- 
chises to railroads, street railways and other public 
service corporations, and it may be as well to make 
a few remarks on the subject here. 

As we have already seen, all the collective powers 
of the people, as well as all public property, are 
vested by society in the government for the benefit 
and protection of all its citizens. That is to say* 
all those powers and privileges which are not al- 
lowed to be exercised by each and every individual 
at his own discretion and in his own manner are 
reserved to the government to be exercised for the 
common good of all. It should be carefully borne 
in mind, then, that all the powers of government 
are derived from the people; that they are en- 
trusted to it for the mutual benefit of all ; that the 
government in exercising these powers is acting 
merely as the agent of the people who support it 
and who owe allegiance to it, and of those who 
afterward ratify its acts, and that as such agent it 
has no power to bind its principal by anything 
done in excess of the authority vested in it. 

Thus the government of to-day has authority to 
act only for the people of to-day, and can bind 



Trusts and Monopolies. 195 

future generations only in so far as they may elect 
to be bound by its acts, and to avail themselves of 
the benefits accruing therefrom. Nor can the gov- 
ernment bind the people of to-day by any act or 
contract which is clearly prejudicial to their in* 
terests, or the terms of which are obnoxious to 
them. The form of government may be changed, 
its action may be repudiated by the people, or it 
may be overthrown; but the rights of its citizens 
remain inalienable, and no power on earth has any 
authority to sell the people into chattel slavery or 
otherwise to deprive them of their liberty, or to 
take away those natural and civil rights which 
make that liberty worth having. Any act of the 
government, therefore, which proposes to barter 
away the interests of the people, or in any way- 
seeks to place control of their affairs beyond 
their power, whether it be for the purpose of 
affording to favored private individuals or cor- 
porations opportunities of amassing great fortunes 
at the expense of the public, or to secure temporary 
or permanent and substantial benefits to the people,, 
no matter how valuable the consideration may be, 
is contrary to natural justice, and can only endure 
so long as the people are willing to tolerate it. 

The reservation of these powers to the govern- 
ment for the purpose of safeguarding the interests 
of the people would seem, on the face of it, to im- 
ply that they were to be exercised and controlled by 
the government itself ; but it is also clear that the 
government must act in all matters through its 
officers or agents, who are to be selected in some 
manner not definitely determined, and that it may 
therefore exercise these powers through agents di^ 



196 Combinations, 

rectly appointed for the purpose, or let them out 
under terms to be fixed by itself, to be exercised 
by private individuals or corporations over which 
it has practically no control, if such an arrange- 
ment would be consistent with the obligations 
which the government owes to the people and with 
the trust imposed in it. 

Let us suppose that the government were to del- 
egate its police powers, such as are now exercised 
by marshals, sheriffs, constables and policemen, to 
a private detective agency. It might be urged that 
these agencies are managed by experienced, practi- 
cal men who would employ only competent per- 
sons. It is quite possible that a much more ef- 
ficient service might be secured in that way than 
is now to be had in many places, and that it would 
be much more economical for the government ; but 
we know that the people would protest most ve- 
hemently against the placing of the enforcement 
of the law and the execution of its writs in the 
hands of private individuals, just as they now ob- 
ject to the exercise of police powers by those 
-agencies when employed to protect mines or other 
property during strikes, lockouts, etc. 

Suppose, then, that the government were to elect 
to confide the making of its laws to a private as- 
sociation of attorneys. It might be claimed in de- 
fense of this course that it would secure the mak- 
ing of wiser and better laws, that much time and 
money now lost through the efforts of inexperi- 
enced men to secure the enactment of impractica- 
ble, unconstitutional and unsafe legislation might 
be saved, and that the unseemly wrangling and 
manoeuvring of party politicians, which occupies 



Trusts and Monopolies. 197 

so much time in all of our legislative assemblies, 
might be avoided. It is altogether likely that 
many benefits might be thus secured, but it would 
be said that in the government by the people they 
should make their own laws, and that it is better 
to have poor laws made by the people themselves 
than to have good laws imposed upon them in the 
making of which they have had no voice. 

Again, it might be thought wise to turn the 
management and control of the courts over to a 
firm of private attorneys for a certain number of 
years. It might then be said that the judiciary 
would thus be taken entirely out of politics, that 
the service of the best legal talent might in that 
way be secured for the bench, and that the cost of 
litigation might be greatly reduced. It is easy to 
believe that many of the abuses which are now 
complained of, particularly in connection with the 
lower courts, might in that way be remedied, that 
dlie cost of litigation might be reduced, and that a 
much greater amount of business might be trans- 
acted. The people would, however, revolt against 
thus placing the administration of justice into the 
hands of private individuals, and would never sub- 
mit to have their rights adjudicated by private 
persons over whom they have no control and in 
whose selection they had no choice. 

Finally, suppose that in some one of our large 
cities the government were to become convinced 
that it would be a wise business venture, and prof- 
itable to the whole community, to grant the entire 
management and control of the city government 
to a well known private business corporation for a 
term of twenty or thirty years. It might be shown 



198 Combinations, 

that only in that way could strictly business meth- 
ods be introduced into the management of munici- 
pal affairs, that the ordinary duties of the govern- 
ment, the construction of public improvements and 
the repair and preservation of public property, 
might be more efficiently and satisfactorily con- 
ducted, that many additional accommodations 
might be provided for the people, that the finances 
of the city might be more judiciously and economi- 
cally expended, and that the taxes might be re- 
duced. It is not difficult to see how it would be 
possible for even a very ordinary business corpora- 
tion to provide a much more businesslike adminis- 
tration than is now enjoyed in many of our great 
cities, and that many of the reforms just indicated 
might be effected without any additional expense 
to the people, while yet affording a handsome profit 
to the corporation to which the franchise of gov- 
ernment had been granted; but the love of free- 
dom and pride of self-government are too strong 
in the hearts of the people to allow them to tolerate 
for an instant the thought of such a contract for 
the sale of their rights. It would be contrary to 
the instinct of a liberty-loving people and destruc- 
tive of the spirit of our free institutions; and the 
mere material advantages which might doubtless, 
in many instances, be derived from such a letting 
out of the powers of government would be worth 
nothing in comparison to the loss of manhood and 
of the rights and privileges of a self-respecting cit- 
izenship resulting from such a surrender of the 
right of the people to govern themselves. 

If, then, the very thought of granting to priva'e 
individuals the power to exercise these important 



Trusts and Monopolies. 199 

functions of government is so repulsive to the peo- 
ple, why is the relinquishing of less important 
powers of government less distasteful to their sense 
of honor and love of principle? If the policy of 
delegating the powers and duties of government 
to private individuals or corporations, when car- 
ried to its natural and logical conclusion and full 
development, becomes so subversive of the funda- 
mental principles of a republican form of govern- 
ment, why is the partial application of that policy 
less inconsistent with these same principles? In 
matters of principle there can be no question of 
degree. The action is either right or wrong. 

Most of the important functions of government 
are made up of a number of more or less unimpor- 
tant duties, and since the right to delegate one 
power implies the right to delegate another, it is 
clear that, even if we assume that the government 
las the right to assign merely its minor duties, a 
government disposed to dispense its powers might 
soon divest itself of practically all of those which 
the people had entrusted to it. 

It is true that the government has, as a matter 
of convenience, in many instances permitted cer- 
tain of its powers and duties to be exercised by pri- 
Tate individuals or corporations, but these have 
been, for the most part, mere temporary arrange- 
ments, to continue only until such time as the 
government should choose to assume the direct 
discharge of such duties; or have been grants for 
a definite term of years, upon conditions which 
gave the government more or less complete control 
over the individuals who were to exercise or dis- 
charge the duties. 



200 Combinations, 

The relation of the community to the individuals 
to whom franchises are granted is precisely the 
game as that of the government to private property 
which has been employed for public purposes. 
Thus private buildings are frequently employed 
for use as post offices, custom houses, etc., and if 
the government were to take a lease of one of these 
buildings for a reasonable number of years it would 
be bound by its contract ; but no officer of depart- 
ment would have the power to bind the govern- 
ment by a perpetual lease of such a building. It 
would also be free at any time to erect its own 
buildings and to abandon the private property 
which it has hitherto employed, subject only to the 
terms of such contract as it had entered into con- 
cerning it. 

By these short term franchises the power to reg- 
ulate these public services is kept well within the 
control of the government; but by perpetual fran- 
chises it is sought to place it beyond the reach of 
governmental interference. The distinction is pre- 
cisely the same as that which exists between the 
leasing of a man's property for a term of years and 
the sale of that property altogether. In the one 
case he retains a large degree of control over it, 
while in the other, even though certain reserva- 
tions as to its use may be made in the deed, he be- 
comes an absolute stranger to it. 

It may be urged that regulations as to the range 
of charges, the rates of compensation, the manner 
of service, etc., may all be provided for in the char- 
ter. Provisions, however, which would be fair and 
reasonable to-day might be very unjust under the 
conditions which obtain fifty years from now, and, 



Trusts and Monopolies. 201 

as explained before, the government of to-day has 
no right to impose unreasonable obligations upon 
future generations or to bind them by contracts for 
which they do not receive a good and sufficient con- 
sideration. No individual has any power to bind 
his heirs for the payment of his debts, unless he 
leaves them sufficient property out of which to pay 
them ; nor can any heir be compelled to accept an 
inheritance unless he believes that it will be to his 
interest to do so. It is just the same with the gov- 
ernment. It would seem, then, that a perpetual 
franchise could only hope to be enforced, so long 
as its terms continued to be reasonably just to the 
people. 

If, now, it be proposed to grant a perpetual fran- 
chise, but to reserve to the government the right to 
revise its provisions from time to time, the gov- 
ernment must then possess the power to revoke the 
grant whenever the grantee refuses to comply with 
its regulations; else it would be powerless to en- 
force the acceptance of the revised conditions. 
Having the power to terminate the grant and to 
impose new conditions, every readjustment of the 
terms would be equivalent to the granting of a new 
lease, and the franchise would, in fact, amount to 
, but little more than a tenancy at will, or during 
good behavior. 

The power of the government to bargain away 
any of the rights and duties which have been en- 
i trusted to it for the protection of the people is 
questioned by Chief Justice Waite, in the language 
used in deciding the Eailroad Commission cases, 
116th United States Eeports, page 325, in which, 
speaking for the court, he says: "This power of 



202 Combinations, 

regulation is a power of government, continuing 
in its nature, and if it can be bargained away at 
all, it can only be by words of positive grant, or 
something which is in law equivalent. If there is 
a reasonable doubt, it must be resolved in favor of 
the existence of the power." The question in- 
volved in this case was the right of the state to reg- 
ulate the charges of railroad companies, and while 
the court did not go further in its decision than 
was necessary to decide the case in hand, and found 
in the construction of the contract which existed 
between the state and its chartered corporations a 
sufficient opportunity to sustain the right of state 
control without placing its decision upon broader 
grounds, the language employed clearly indicates 
that, in the mind of the court, the right of the 
state to preserve its power of control over all pub- 
lic service corporations rests upon much broader 
principles of law, which might be invoked when- 
ever the necessities of the case might require it. 

The same principle was more fully expressed by 
the court in the case of Stone versus Mississippi, 
101st United States Eeports, page 814, as follows: 
"]$o legislature can bargain away the public health 
or the public morals. The people themselves can- 
not do it, much less their servants. The supervi- 
sion of both these subjects of governmental power 
is continuing in its nature, and they are to be dealt 
with as the special exigencies of the moment may 
Tequire. Government is organized with power to 
provide for them. For this purpose the largest 
legislative discretion is allowed, and the discretion 
cannot be parted with any more than the power it- 
self." It has again been thus strongly approved in 



Trusts and Monopolies. 203 

one of the most recent decisions of the court, the 
opinion being delivered by Mr. Justice Harlan: 
"In other cases we have adjudged that the author- 
ity given by legislative enactment to carry on a 
lottery, although based upon a consideration in 
money, was not protected by the contract clause of 
the Constitution, this for the reason that no state 
may bargain away its power to protect the public 
morals, nor excuse its failure to perform a public 
duty by saying that it had agreed by legislative 
enactment not to do so." ( Champion versus Ames, 
United States Eeports, No. 188, page 321; also 
Douglas versus Kentucky, United States Eeports, 
No. 168, page 488.) 

It seems probable, therefore, that the principle 
of Ultra Vires will before long come to be applied 
to the government itself, as well as to its minor 
subdivisions and to private corporations, and that 
the granting of franchises will not be construed to 
bring the matter within the doctrine of the Dart- 
mouth College case, except in cases in which the 
parties are clearly capable of contracting upon the 
subject in question. 

Perpetual franchises, then, are contrary to the 
spirit and purposes of the government of a free 
people, and while there are instances in which such 
franchises have been granted to private corpora- 
tions in various parts of this country, their dura- 
tion, it is believed, will be found to depend upon 
the skill which is displayed by their proprietors 
in conforming to the wishes of the public. 

We now come to consider the conditions which 
confront us at the present time. Nearly all those 
branches of public service commonly known as 



204 Combinations, 

public utilities, such as railroads, telegraphs, tele- 
phones, gas and electric light, water-works, street 
railways, etc., are in the great majority of cases 
now controlled by private corporations. We be- 
lieve that what has already been said of the rights 
of private individuals and of the public in relation 
to these various forms of service will be sufficient 
to indicate our position on the subject, and that it 
is merely necessary to point out the conditions in 
order to suggest the remedy. 

As we have seen, the convenience or benefit to 
the public is the only justification for the operation 
of these services by private individuals. The ques- 
tion arises, then, is the present service satisfactory 
to the public ? 

We will take the street railway situation in the 
city of Chicago as an instance. In 1883 the fran- 
chises of the principal lines of street railway in 
that city were extended for a period of twenty 
years, which was the full length of time to which 
they could be extended under the city charter. 
About ten years later these same companies began 
to work to secure a further extension of time, and 
to that end they invoked the aid of the State Legis- 
lature. From that time until the present day the 
City Council has had traction measures constantly 
before it claiming its attention, committees and 
commissions have been appointed, investigations 
made and elaborate reports returned upon the sub- 
ject. For ten years the State Legislature has had 
measures pending at every session looking to some 
settlement of the traction question in the city of 
Chicago, out of which many scandals have arisen 
and which have occasioned much loss of time and 



Trusts and Monopolies. 205 

expense to the State Government. During that- 
time committees of city officials and private citi- 
zens have gone from Chicago to Springfield to at- 
tend every session of the State Legislature to work 
for or against the passage of one or more of these 
traction measures ; for six years the sole important 
issue in every municipal election held in the city 
has been the traction question, and during these 
contests neither political party has ever assumed 
the defense of the local traction companies; hun- 
dreds of suits have been instituted by the city gov- 
ernment to compel these companies to comply with 
various provisions of city ordinances, most of 
which have been stubbornly contested, and in 
April, 1902, the people of the city were asked to 
vote by ballot for or against municipal ownership 
of the street car system. The vote stood 142,826 
for municipal ownership and 27,998 against it; the 
question, however, was merely submitted to ascer- 
tain public sentiment, and the vote had no legal ef- 
fect whatever. The traction companies have ad- 
mittedly allowed their properties to sink into an 
'intolerable state of neglect and inefficiency, until 
it is estimated that it will require an expenditure 
of from forty to fifty millions of dollars to put 
them in condition to afford to the people a first- 
class, up-to-date street car service. The accommo- 
dation rendered has for several years been very un- 
satisfactory, and no other subject since the days of 
the Spanish-American War has occupied so much 
space in the columns of the local press as have the 
various phases of the traction problem. The city 
has recently secured the enactment of legislation 
enabling it to enter into arrangements with the 



206 Combinations, 

traction companies looking to the early acquisition 
of the street car properties by the city, but no set- 
tlement has been effected and negotiations for the 
extension of the company's franchises are still 
pending. All this, at the end of more than forty 
years' experience with the operation of the street 
: car system by private corporations, would seem to 
make it quite clear that private ownership of pub- 
lic utilities in this instance has not proved entirely 
satisfactory to the people of Chicago. 

The railroad systems of the country are also 
owned and operated by private corporations, and 
nearly every state in the Union has attempted to 
regulate their affairs, and to secure to the people 
a fair measure of service at reasonable charges, by 
the enactment of laws and the appointment of 
boards for their supervision and control. In spite 
of these attempts on the part of the states to re- 
strain them, they began to form trusts, pools and 
combinations of various kinds, to discriminate in 
their rates made to different persons and between 
different places, to pay rebates to some and to 
make excessively high charges to others, all of 
which caused such general and widespread dissatis- 
faction among the people that Congress in 1887 es- 
tablished the Interstate Commerce Commission for 
the purpose of correcting these and similar abuses. 

The result of the labors of this commission, in 
conjunction with the efforts of the several states, 
to remedy these same evils may perhaps best be 
judged from the conditions which prevailed during 
the past year, as shown by the following expres- 
sions contained in the report of the Interstate 
Commerce Commission for the year 1902: "The 



Trusts and Monopolies. 207 

tendency to combine continues to be the most sig- 
nificant feature of railway development. The facts 
in this regard are matters of common knowledge, 
and little is gained by the mention of particular 
instances. It is not open to question that the com- 
petition between railroad carriers which formerly 
prevailed has been largely suppressed, or at least 
brought to the condition of effective restraint. The 
progress of consolidation, in one form or another, 
will at no distant day confine this competition 
within narrow and unimportant limits, because the 
control of most railway properties will be merged 
in a few individuals whose common interests impel 
them to act in concert. While this will insure, as 
probably nothing else can in equal degree, the ob- 
servance of published tariffs, and so measurably 
remove some of the evils which the act was de- 
signed to prevent, the resulting situation involves 
consequences to the public which claim the most 
serious attention. A law which might have an- 
swered the purpose when competition was relied 
upon to secure reasonable rates is demonstrably in- 
adequate when that competition is displaced by the 
most far reaching and powerful combinations. So 
great a change in conditions calls for corresponding 
change in the regulating statutes. . . . Thir- 
ty-eight formal proceedings, double the number 
brought in the preceding year, have been instituted 
before the commission since its last report to Con- 
gress. These cases directly involve some of the 
rates and practices of three hundred carriers- 
. . . Besides the injunction and criminal pro- 
ceedings which have been instituted at the request 
of the commission, ten civil cases to enforce orders 



208 Combinations, 

of the commission are pending in the Federal 
courts." 

We have already referred to the extraordinary 
contract between the railroads and the Standard 
Oil Trust by which the railroads undertook to as- 
sist in crushing out the independent oil refiners by 
charging them in excess of the usual rates for car- 
rying their products, and then paying over the ex- 
cess so collected to the Standard Oil people. It is 
commonly accepted as an established fact that the 
Tailroads continued to pay rebates to favored ship- 
pers, at least until the establishment of the Inter- 
state Commerce Commission, and most people be- 
lieve that they have continued to pay them until 
very recently, if, in fact, they are not still doing so. 

Mr. John W. Gates thus estimates the amount of 
such rebates which have been paid, and describes 
the prosperity and business methods of the railroad 
companies: "The amount of money paid out by 
railroad companies in rebates since the passage of 
the Interstate Commerce law in 1886 would, in my 
judgment, almost pay the national debt. What 
has made the railroads poor has been the carrying 
of people for nothing and cutting nominal tariffs 
actually in two in many instances. The railroad 
situation in the United States to-day, however, is 
better than ever in its history. While rates are low, 
they are adhered to. There is not one dollar paid 
out now in rebates where two years ago there were 
perhaps one thousand or ten thousand. This ac- 
counts very largely for the increased net earnings 
and the supposed decrease in cost of operation. 

"People here in New York have but a remote idea 
of the magnificent condition of most of the rail- 



Trusts and Monopolies. 209 

roads of the West, unless they have traversed them 
within the past three or four years. 

"The railroads have been earning so much money 
that their greatest trouble has been to hide a large 
portion of their net earnings, and this they have 
done by charging them to operating expenses/' 

Thus we see that private control of public util- 
ities of national interest and importance has also 
given much cause for dissatisfaction. 

Instances of this kind might be multiplied, and 
much might be said of the dissatisfaction occa- 
sioned by private control of the telegraph, the tele- 
phone, of gas and electric light plants, water- 
works, etc., but the principle involved in all of these 
cases is precisely identical with that of the rail- 
roads and street railway service, some of the con- 
ditions of which we have just described, and the 
same evils are in a greater or less degree common 
to all and require a like remedy. It is not our 
purpose to attempt to make it appear that private 
management of public services has in all cases 
proved unsatisfactory or injurious to the public; 
we merely wish to show that there are instances 
in which it has proved to be so, and to indicate 
the remedy to be applied in those cases. We leave 
it to the general knowledge of the reader to suggest 
how many of such cases there are to be found. We 
have shown an instance of a local street railwa3 r 
system subject to the jurisdiction of city govern- 
ment, and of great railway systems subject both to 
state and federal jurisdiction, in both of which 
private management has resulted in very general 
discontent among the people, and we shall now turn 



210 Combinations, 

our attention to the consideration of the remedies^ 
to be applied. 

Let us first inquire, what is it that gives rise to 
this general displeasure with the private control 
of public services? In the case of the street rail- 
way companies to which w^e have referred, it was 
the continual efforts of the corporations to increase 
their private gains by stinting the service they af- 
forded to the people, and by securing greater powers 
and privileges, and longer leases of their right of 
way. In the case of the railroads, it was the unfair 
methods resorted to by the companies to increase 
their profits. Thus we see that in both instances 
it was private interest that inspired the persistent 
opposition to the will of the people, and which 
prompted the corporations to render the most in- 
ferior service that would be tolerated by the muni- 
cipalities in return for the grants which they had 
received. 

What, then, is the remedy which would natu- 
rally suggest itself? Eliminate private interest 
from the problem and you have removed the chief 
cause of all the evils of which we now hear com- 
plaints in connection with the operation of public 
services. We have already seen from our analysis- 
of the rights of the individual and of the com- 
munity, that all proprietary rights in these various 
services, as well as the duty of providing them, be- 
long to the community. There can, therefore, be 
no valid objection to the right of the government to 
dispense with the services of private individuals or 
corporations in connection with these public duties 
whenever their management of them ceases to be 
beneficial to the public. 



Trusts and Monopolies. 211 

The natural obligation which rests upon the 
government to provide for the people all those forms 
of public service which the very structure and or- 
ganization of society forbids and prevents any in- 
dividual or group of individuals from providing 
without the sanction and assistance of the govern- 
ment; the ownership and control of the only ave- 
nues through which it is possible to afford these 
services to the people; the supervision and control 
'which it is absolutely necessary for it to maintain 
over these services no matter by whom they may be 
provided ; and the great difficulty of procuring the 
most efficient service from private individuals 
wherever their personal interests become directly 
opposed to the public; all serve to indicate it to 
be the imperative duty of the government to assume 
the direct management and control of all these sev- 
eral forms of public service. 

That the assumption of these duties by govern- 
ment is correct in theory, has, we believe, already 
been made sufficiently clear by what has been said 
of the close relationship of such services to the 
functions of government, and of the nature of the 
duties to be discharged. The Government of the 
United States has recognized it to be the duty of 
the government to provide these services, by grant- 
ing millions of acres of the public land and lending 
its own credit to private corporations for the pur- 
pose of encouraging the construction of railroads 
and canals, and the practicability of government 
operation of these public necessities would seem to 
be sufficiently demonstrated by the numerous well 
known instances both in this country and Europe 
in which nearly every form of these services has 



212 Combinations, 

for years been owned and operated by municipali- 
ties. 

There are those, however, who question the ex- 
pediency of the government undertaking the direct 
management of street railways and other branches 
of service, in which great amounts of capital are 
involved and large numbers of persons are em- 
ployed. They do not question the correctness of 
the principle, of the right of government to assume 
the discharge of such duties ; but they say that our 
municipal governments are too loosely managed, 
that they are too new and inexperienced, and too 
much subject to change and manipulation by par- 
tisan politicians to be intrusted with the manage- 
ment of the affairs of a great business enterprise. 

Thus it is thought by many that it would be 
impracticable for the city of Chicago to undertake 
to operate its own street railway system. Yet these 
same people think nothing of establishing a sanitary 
district, comprising territory lying largely within 
the limits of the city and controlled by the votes of 
the same citizens, from which is elected a board of 
six trustees which is given the power to levy taxes 
and to expend forty or fifty millions of dollars in 
the construction and operation of a canal — an 
amount which would be more than sufficient to re- 
produce the entire street car system of the city 
as it stands to-day. 

It is admitted that municipal ownership may 
work well enough in England, Scotland and Ger- 
many where government is old and settled in its 
way, and not likely to be influenced by the enthu- 
siasm and impetuosity of youth; but we are told 
that under our form of government, the placing 



Trusts and Monopolies. 213 

of so much power in the hands of the adminis- 
tration is apt to lead to the building up of strong 
political machines at the expense of the public serv- 
ice; that the appointment of politicians to more 
responsible positions would lead to greater corrup- 
tion and mismanagement, and that the employ- 
ment and control of so great a number of voters 
would give to any political party a very material 
advantage in its attempts to perpetuate itself in 
power. 

As to the capacity of our municipalities to con- 
duct their own public works in a thoroughly busi- 
nesslike and satisfactory manner, we wish to re- 
mind the reader that the ability of the American 
people to govern themselves was also denied at the 
time of the American revolution, and the same 
thing has been said of every nation which has ever 
attempted to establish a republican form of govern- 
ment. In this case, however, it is the same 
American people, or their descendants, who have 
proven to the world their ability to govern them- 
selves, who now question their own ability to con- 
duct certain minor forms of public service which 
are merely designed to contribute to their own per- 
sonal convenience and comfort. 

But what is it that renders our people incapable 
of discharging these duties? It is not the power 
to do so that is denied, for that is admitted; it is 
not the intellectual capacity, for much greater 
things have been successfully undertaken; it is 
not the want of business experience, for the serv- 
ices of the very same men who are now employed 
to manage these properties could be secured by the 
government as well as by private corporations, and 



214 Combinations, 

the entire staff of employees might be retained, if 
desired. It is, then, their honesty that is called 
in question. If the honesty of the "American peo- 
ple can be trusted with the protection of our lives 
and property ; if it has built up the greatest govern- 
ment that the world has ever known and preserved 
its national institutions throughout a century and a 
quarter, free from corruption, and true to the pur- 
poses of their creation, surely it can be trusted with 
the management of a local street car line or water 
works. 

Numerous instances of dishonesty in public life 
are to- be found, it is true, but these may be shown 
to exist under every form of government, and are 
not peculiar to our own. Dishonesty is also to be 
met with in the management of private affairs, and 
our state penitentiaries are filled with examples. 
When an employee of a private corporation is 
found to be dishonest, he may be promptly pun- 
ished; but when the corporation itself is dishonest 
in its dealings with the public, it cannot be ef- 
fectively punished so long as it is allowed to re- 
main in control of the public service. When, on 
the other hand, an employee of the government 
is found to be dishonest he may also be speedily 
punished ; but if the administration of the govern- 
ment itself is found to be dishonest, it may be 
promptly removed by the votes of the people. 

Dishonesty in private corporations which are 
operating public services may, and undoubtedly, 
does exist in spite of the efforts of the government 
to prevent it, but dishonesty in governmental af- 
fairs can only exist so long as the people are willing 
to tolerate it. 



Trusts and Monopolies. 215 

The American people have thus far proved equal 
to every emergency which has been encountered and 
it is believed that they will not now be found in- 
capable of managing their own local affairs. Greater 
difficulties inspire more determined efforts, and in- 
creasing responsibilities suggest more perfect safe- 
guards ; and with the development and application 
of a thorough and practical civil service system 
to the affairs of municipalities, there would seem 
to be no reason why they should not be capable of 
managing all their various forms of public service. 

As has already been suggested, one or more forms 
of these public utilities have for years been operated 
by municipalities in various parts of this country; 
but even in those localities in which one class of 
service has been successfully and satisfactorily con- 
ducted, the same objections are made to the exten- 
sion of municipal ownership to other branches. 
Thus, in the city of Chicago, although the public 
water service has been owned and operated by the 
city government for more than fifty years to the en- 
tire satisfaction of the people, and while no one 
would now think of transferring this service to 
private management, yet there has been a consider- 
able protest made against the extension of munici- 
pal control so as to include the street car system. 
The prevailing sentiment, however, appears to be 
in favor of acquiring this service at the earliest 
practical date. 

It is the custom of this class of objectors to 
compare some weak point of municipal operation, 
not with the accommodation furnished by individ- 
uals in some similar service, but with some par- 
ticular feature of the management of strictly pri- 



216 Combinations, 

vate property; such as to contrast the erection of 
public buildings when done directly by the govern- 
ment, with the speed with which similar structures 
are erected by private parties. This comparison 
is manifestly unfair, for in the case of individual 
property, every consideration requires the proprie- 
tor to use the utmost care and most skillful manage- 
ment; whereas in the operation of public property 
by private persons, the controlling purpose is to 
get the most out of it in the shortest time, lest it 
be taken from them. If comparisons are to be 
made, they should be with the management of pub- 
lic property by private corporations, and then, even 
in the case of the erection of the public buildings 
referred to, if the comparison is made with the 
numerous delays and innumerable devices which 
are resorted to, in order to procure extensions of 
time and additional expenditures of money, which 
are so common in the construction of public build- 
ings by private contractors, it will not, it is be- 
lieved, appear so entirely discreditable to the show- 
ing made by government work. 

The operation of the postal system by the United 
States Government would seem to afford a sufficient 
answer to those who fear the use of the patronage 
thus afforded for political purposes. Tens of thou- 
sands of men, who belong to every political party, 
are there employed throughout the changing ad- 
ministrations of government, but with the aid of 
a rigid civil service system, they are kept practi- 
cally free from political control, and afford but 
slight aid to the administration in matters of parti- 
san politics. It is safe to say that the employees of 
the Post Office Department are much less obedient 



Trusts and Monopolies. 217 

to the political dictation of the administration in 
power, than are the employees of private corpora- 
tions which have received special favors from the 
government. 

While these are among the objections usually re- 
lied upon in opposing municipal ownership of pub- 
lic utilities, it is believed that the fear of invading 
the domain of private enterprise is the one which 
has had the most influence with the people at 
large, and it is chiefly to anticipate this objection 
that we have entered into so extended an analysis 
of the rights and powers of government. We have 
attempted to show from the very nature of these 
public services that the duty of providing them 
rests primarily upon the government, and that the 
letting of them to be operated by private individuals 
is a mere secondary consideration which is neces- 
sarily temporary in its duration; that the dis- 
charge of these duties is, therefore, a governmental 
function no matter by whom they may be per- 
formed, and the government has an absolute right 
to regulate them, and to change its methods of 
performing them whenever it sees fit to do so. It 
will, of course, be understood that it is not pro- 
posed to take any of the property of private in- 
dividuals which may have been used in connection 
"with the operation of these services without making 
due compensation therefore, as required by law. 

We thus show that these services are proper func- 
tions of government, and make a distinction be- 
tween the service itself and the property used in 
connection with it, and between the right of the 
public to control the service and its right to con- 
trol the property employed in it, believing that 



218 Combinations, 

when the people understand the true extent to which 
the community may justly go in its control of pub- 
lic affairs, and realize that there is no danger of 
any encroachment upon the natural field of private 
business, they will unhesitatingly demand muni- 
cipal ownership and control of all forms of public 
service. 

In making this distinction between the service 
rendered by quasi-public corporations, and the prop- 
erty employed in connection with it, we have de- 
parted somewhat from the usual custom of writers 
upon the subject ; but it is believed that it will be 
found to be in perfect accord with the spirit of the 
decisions of the courts and the principles an- 
nounced by the best writers, if not always in entire 
harmony with the language employed. 

Thus, the point established by these decisions is 
the power of government to regulate the charges 
and manner of service afforded by these quasi- 
public corporations. On this proposition the Su- 
preme Court of the United States was unanimous, 
and is supported by the leading jurists and text 
writers. In the case of Munn versus Illinois, 94 
United States "Report, page 311, however, which is 
the leading case upon the subject, the Supreme 
Court of the United States expressed itself as fol- 
lows: "It has been customary in England from 
time immemorial, and in this country from its 
first colonization, to regulate ferries, common car- 
riers, hackmen, bakers, millers, wharfingers, inn- 
keepers, etc., and in so doing to fix a maximum of 
charge to be made for services rendered, accom- 
modations furnished and articles sold. To this day 
statutes are to be found in many of the states upon 



Trusts and Monopolies. 219 

some or all these subjects ; and we think it has never 
yet been successfully contended that such legisla- 
tion came within any of the constitutional prohibi- 
tions against interference with private property. 

"When, therefore, one devotes his property to a 
use in which the public has an interest, he in effect 
grants to the public an interest in that use and must 
submit to be controlled by the public for the com- 
mon good to the extent of the interest he has thus 
created. He may withdraw his grant by discon- 
tinuing the use, but so long as he maintains the 
use he must submit to the control." 

The court would thus appear to have emphasized 
the right of the government to exercise a certain 
amount of control in private property which is de- 
voted to a public use, and this has given rise to much, 
adverse criticism of the decision. It is said that the 
right of private property is as sacred as the right 
of life and liberty, and that the government is 
equally bound to protect the individual in the en- 
joyment of it. The power of the government to 
regulate the charge or compensation which a per- 
son shall receive for the use of his property is 
said to be in fact the right to deprive him of the 
fruits of his property and of all that makes it useful 
or desirable to him, leaving him merely the empty 
title, and that it amounts to a virtual confiscation 
of his property under the guise of regulation. It 
is declared to be subversive of the rights of private 
property and to destroy practically all the guaran- 
ties of the Constitution and of the common law 
invoked for the protection of vested corporate 
rights. 

Speaking of Munn versus Illinois and the Granger 



220 Combinations, 

Cases, Mr. W. P. Wells, in his treatise entitled 
The Dartmouth College Case and Private Corpora- 
tions, 9 Am. Bar Assoc. Rep., 229, says : "The de- 
cisions seem to us to be subversive of the rights of 
private property, heretofore believed to be pro- 
tected by constitutional guaranties against legisla- 
I tive interference ; they hold that all property and 
all business of the state are held at the mercy of 
the legislature ; they deprive private and corporate 
owners of their property absolutely, although under 
the guise of mere regulations as to its use and em- 
ployment and non-interference with its title and 
.possession." Referring to the decisions in the 
Eailway Commission Cases, 116 U. S., 307, which 
affirm the same principle, and to the dissenting 
opinions of Justices Harlan and Field, he contin- 
ues : "These decisions assert principles which have 
not received, and, as we believe, cannot receive, the 
assent of the most weighty professional opinion. 
The reasoning of the dissenting opinions seems to 
be unanswerable. These express with cogent logic, 
abundant authority and masterly strength the con- 
sequences of a doctrine that the legislative power 
can be unchecked in its interference with business 
essentially private, or its prescription of the com- 
pensation which private and corporate owners 
6hall receive for the use of their property." 

The court in Munn versus Illinois quotes high 
English authorities in which similar language is 
employed and which shows that the right of the 
government to regulate the use of property which 
has been dedicated to a public use, has been recog- 
nized by the common law for the last three hundred 
years ; but the point which the court had in mind 



Trusts and Monopolies. 2211 

in these cases, as well as in the other cases cited, was 
clearly, the regulation of the service, and not the 
property. The property is regarded as a tangible 
representative of the service, which must be oper- 
ated upon in order to control the service; it is 
merely an incident to the service and not an in- 
dependent object which is sought to be controlled. 

It is said that property becomes clothed with a 
public interest when used in a manner to make it 
of public consequence and to affect the community 
at large; but while the power to regulate these 
properties is said to be fundamental with the gov- 
ernment, the public interest in them is admitted 
to be so slight that it may be destroyed at the pleas- 
ure of the individual proprietors. They may as- 
sign, remove, destroy, or otherwise withdraw their 
property from use without the leave or assent of 
the public, and in any of these cases the interest of 
the public is said to be terminated. Thus, the 
dignity of this power appears to be entirely dispro- 
portionate to the interests or title of the government 
to the property over which it is supposed to be exer- 
cised, and upon the existence of which it would 
seem to depend. 

But the power to regulate does not cease with 
the destruction of the tangible property. The ferry 
may be destroyed, but the power to regulate the 
carrying of persons and property across the stream 
remains, and the duty to provide another ferry 
or bridge, continues to rest upon the government. 
It is therefore the service, and not the property 
which the government seeks to regulate; and it is 
that which the courts have had in mind. 

Mr. Justice Field dissented from the finding of 



222 Combinations, 

the court in the case of Munn versus Illinois, in 
an elaborate opinion in which he was joined by 
Mr. Justice Strong. After assenting to the propo- 
sition that government has a right to control pri- 
vate property which has been regularly dedicated 
to a public use, he disagrees with a more general 
statement that property becomes clothed with a 
public interest whenever it is used in a manner to 
make it of public consequence. He said that the 
right to regulate private property meant the right 
to take the beneficial interest of that property, 
and that to give to legislatures the power to deter- 
mine when property became so clothed with a pub- 
lic interest and, therefore, subject to governmental 
control, was to destroy for all useful purposes the 
efficiency of the constitutional guaranties. 

The particular point at issue in the case was 
whether the grain elevators of the city of Chicago 
constituted such a public service as to bring them 
within the power of the state to control their 
charges. The court held that they did, but the dis- 
senting opinion maintained that the rule an- 
nounced by the court for determining the right of 
government to control private property, was so 
broad and indefinite that it might be extended so 
as to include nearly every form of private property 
that became in any way serviceable to the public; 
that the operation of grain elevators was not a form 
of public service known to the common law; that 
it was conducted by private persons upon private 
property ; that no franchise or grant was received 
from the government ; that no public property was 
employed in connection with it; and that it did 
not fall within any rule that would not be equally 



Trusts and Monopolies. 223 

applicable to almost every form of private business. 

The criticism of the case, then, has chiefly been 
based upon the declared right of government to 
regulate certain classes of private property, anfl the 
fear of the extension of that power so as to abro- 
gate all the safeguards which have been established 
for the protection of the rights of private property. 
But in spite of the storm of criticism with which it 
has been assailed, the principle announced in the 
case has been ever since sustained, and has not been 
extended in its application beyond that class of 
cases which we may reasonably presume to have 
been contemplated by the court. 

Let us then inquire whether the difference be- 
tween the court and its critics has not rather been 
one of definition, than of principle. 

The following extract from the opinion of Lord 
Ellenborough in the case of Alnutt versus Inglis, 
12 East., 527, decided in 1810, was approvingly 
quoted both in the opinion of the court and in the 
dissenting opinion of Mr. Justice Field ; and as it 
would therefore seem to contain the principle 
which the whole court had in mind, the difficulty 
in reaching the unanimous decision appears to 
have been in construing it and applying it to the 
affairs of to-day. 

"There is no doubt that the general principle is 
favored, both in law and justice, that every man 
may fix what price he pleases upon his own prop- 
erty, for the use of it ; but if for a particular pur- 
pose, the public have a right to resort to his prem- 
ises and make use of them, and he have a mo- 
nopoly in them for that purpose, if he will take the 
benefit of that monopoly he must, as an equivalent, 



224 Combinations, 

perform the duty attached to it on reasonable 
terms." 

After quoting this passage Justice Field ob- 
serves that in this case it was the grant from the 
government together with the use which clothed the 
property with a public interest. This was undoubt- 
edly, in a sense, true of the particular case in ques- 
tion, for that particular monopoly was created by 
royal grant; but it will be readily perceived that 
the language of Lord Ellenborough clearly an- 
nounces a much broader principle. It is there de- 
clared to be the monopoly, together with the use, 
which creates the public interest, and that is just 
as true to-day as it was when announced nearly 
one hundred years ago ; and it makes no difference 
whether the monopoly be created by governmental 
grant or otherwise. 

That the court in Munn versus Illinois had this 
rule in mind, is shown by the reproduction of it 
in the opinion of the court, and by the statement 
that the elevators in question had acquired a virtual 
monopoly of the business in the city of Chicago, 
that the entire business was controlled by a few 
men who fixed prices at the beginning of the year 
to which all were obliged to conform, that com- 
petition was destroyed, and that the public was 
compelled to submit to their terms. 

The rule laid down by Lord Ellenborough, then, 
appears to include all that was intended to be af- 
firmed by the Supreme Court of the United States 
in Munn versus Illinois, and since it defines the 
means by which it may be determined with reason- 
able certainty the limits to which governmental 
control may be extended, and is not, therefore, 



Trusts and Monopolies. 225 

open to the same criticism to which that case has 
been subjected, it would seem to be a much more 
appropriate statement of the law than that adopted 
by our court. It will also be further observed that 
this definition of Lord Ellenborough eliminates 
the idea of governmental control of private prop- 
erty, and deals directly with the subject proposed 
to be regulated, which is the service. 

We thus find a highly authoritative statement of ^ 
the law in perfect accord with the views which we * 
have already expressed; that government possesses 
the power to protect its people against every in- 
fringement of their rights, and that it is its duty 
to regulate and control all those forms of public 
service which the very organization of society re- 
quires to be kept equally accessible to all its mem- 
bers. 

This rule which has stood as the definition of the 
common law upon the subject for nearly a century, 
is safe, yet comprehensive. It assures the people 
against the fear of governmental interference in 
the affairs of private business ; it encourages them 
to allow to the government the full measure of 
power necessary to insure the best possible manage- 
ment of all public affairs, and secures to the govern- 
ment complete power to control monopolies of every 
kind wherever they may be found. 

"There is no doubt that the general principle is 
favored both in law and justice, that every man 
may fix what price he pleases upon his own prop- 
erty, for the use of it ; but if, for a particular pur- 
pose, the public have a right to his premises and 
make use of them, and he have a monopoly in them 
for that purpose, if he will take the benefit of that 



226 Combinations, 

monopoly he must, as an equivalent, perform the 
duty attached to it on reasonable terms." This is 
sound law. It means that the government is com- 
petent to protect every interest of its citizens ; that 
whenever any person secures a monopoly of any 
service or commodity which is necessary to the com- 
fort or convenience of the public, no matter in 
what way that monopoly may have been acquired, 
he thereby makes his business subject to govern- 
mental regulation and control for the benefit of all 
who are dependent upon its products; and in af- 
fording this protection and regulation, it may as- 
sume the ownership and operation of any or all 
of these public interests whenever, in its judg- 
ment, the best interests of the people and the wel- 
fare of the community may seem to require it to do 
so. 



Trusts and Monopolies. 227 



CHAPTER IX. 

MONOPOLIES AND THE TARIFF. 

In considering the relations between monopolies 
and the tariff, we have no intention of allowing 
ourselves to be drawn into any discussion of the 
merits of the protective system in its general ap- 
plication, or of the relative merits of protection 
or free trade. We wish to keep constantly before 
our minds the fact that monopoly is the central 
subject of our investigation, and that we are to 
study the tariff merely to determine wherein it 
may tend to create, promote, perpetuate, assist, 
or otherwise affect monopolies. In pursuing this 
inquiry, we wish our readers to lay aside for the 
time, whatever feelings of political friendship or 
antipathy they may have associated with the policy 
of protection, and to examine this question strictly 
upon its merits, regardless of how their conclusions 
may prove to coincide, or be at variance with their 
views respecting the policy in general. We wish 
them to look upon the protection afforded to mo- 
nopolies as a new application of the principle, and 



228 Combinations, 

one which was not contemplated by the founders of 
the protective theory, and to examine it impar- 
tially, with no disposition to question the motives or 
good intentions of those who framed the tariff 
laws ; also, with no reference to the question as to 
whether protection should, or should not, continue 
to be afforded to the manufacturers of articles 
vrhich are not controlled by monopolies. 

Monopoly, in the first instance, depends upon 
the ability to secure control of a sufficiently large 
percentage of a commodity to enable the would-be 
monopolist virtually to control the market for that 
article. Thus, a concern which controls from sixty 
to eighty per cent, of the production of petroleum, 
can very largely dictate prices, and prescribe the 
conditions under which its rivals must do busi- 
ness. 

The ability to secure control of such a percentage 
of a given commodity, depends upon the available 
supply of it in the market, the abundance and dis- 
tribution of the raw materials of which it is made^ 
and the difficulties attendant upon the production 
of the finished product. Thus, the greater the 
supply the more difficult it will be, and the greater 
amount of capital will be required to make it 
possible to purchase a sufficient quantity to be able 
to control the market; but even the greatest sup- 
ply must eventually become exhausted or insuffi- 
cient, and the power of the monopolist must ulti- 
mately depend upon his ability to control the 
sources of production, and the supply of the 
raw materials required. 

Thus, the raw material required in the produc- 



Trusts and Monopolies. 229 

tion of corn, namely, the soil, is very abundant, and 
may be found in all parts of the country; the 
process of production, or cultivation, is simple, re- 
quiring but little skill and small capital, and is 
pursued by a very great number of individual 
proprietors. The attempt, therefore, to secure con- 
trol of a sufficient percentage of the source of pro- 
duction to monopolize this commodity, would be 
attended with very great difficulties, and so there 
is no monopoly in the production of corn. Bitu- 
minous coal is found in large quantities, under- 
lying large tracts of land in numerous districts, 
widely scattered throughout the country. It would 
require a great amount of capital to purchase and 
hold these lands, and we have thus far had no mo- 
nopoly in the output of bituminous coal. 

Anthracite coal, on the other hand, is deposited 
in comparatively small quantities, in relatively 
narrow districts, and in but few parts of the United 
States. It has been quite easy, therefore, for a 
few large corporations to purchase practically all 
these sources of supply, and we have a most power- 
ful and oppressive monopoly in that product. 

Iron ore is found in many parts of the country, 
and while it is not difficult to take the ore from 
the earth, yet it requires large amounts of capital 
to convert it into iron and steel, and we find a 
gigantic monopoly in the production of these 
metals. 

Whatever serves to restrict the supply of any 
commodity, makes it easier to secure control of the 
market, and thereby facilitates the creation of a 
monopoly. A duty levied upon the importation of 



230 Combinations, 

a given class of foreign-made articles, for the pur- 
pose of encouraging the manufacture of them in 
this country, must necessarily raise the price of 
these goods to the American consumer, and will 
therefore tend to restrict their importation. 

The purpose of the imposition of protective du- 
ties is to enable the home producer to raise the price 
of his product to a point just a little below that of 
the foreign-made article, plus the amount of duty 
imposed. So long, therefore, as the home pro- 
ducers are content to keep their prices a little be- 
low the point at which foreign-made articles of the 
same kind can be sold after paying the duties im- 
posed, the tariff laws serve as a wall encircling our 
country, and excluding all products of foreign na- 
tions, which fall within the enumerated lists of 
articles to which protection is afforded. 

The exclusion of this volume of foreign-made 
goods, manifestly greatly reduces the extent of what 
we term our home market, and renders it much 
more susceptible to manipulation by those who are 
seeking to secure a monopoly. 

A moment's reflection will suggest to any one 
many of the difficulties which must necessarily at- 
tend any attempt to monopolize the world's pro- 
duction of any given article. Eace distinctions and 
prejudices, variety of language, international politi- 
cal relations, difference of taste, customs, and man- 
ner of doing business, diversity of class, the diffi- 
culties of enforcing agreements between the parties 
to a combination, and the vast amount of capital 
that would be required, — all combine to discourage 
any attempt to form a monopoly. Whereas, with 



Trusts and Monopolies. 231 

the market restricted to the confines of a single 
nation, many of these difficulties would disappear 
entirely, and others would assume much less for- 
midable proportions. It is just as though we were 
to attempt to dip out or control the waters of Lake 
Michigan; we would have before us an intermina- 
ble task. But if we construct a wall around a small 
portion of it, just as is commonly done in the con- 
struction of dry docks in which vessels are to be 
repaired, we can then pump out the water, or con- 
trol the volume within the inclosure at pleasure, 
and with but little difficulty. 

Or, to be more specific, let us take a practical 
example. Suppose we wish to monopolize the 
world's output of penknives ; we shall have to take 
into consideration the productive capacity of all 
the civilized nations, the different languages, cus- 
toms and laws which are peculiar to each, the diffi- 
culty of inducing the manufacturers of one nation 
to confide in, and to combine with those of another, 
and the great amount of capital that would be 
required to unite the widely scattered plants, and 
we will soon be forced to realize that a task full 
of extraordinary difficulties awaits us. But, if one 
nation will levy an import duty upon penknives of, 
say, forty cents each on those valued at fifty cents, 
which is the duty imposed by the present tariff laws 
of the United States, a knife which before sold: 
for fifty cents in the open market could not now 
be sold within that nation for less than fifty cents 
plus the duty paid, which in the case assumed is 
forty cents, making the selling price of the foreign- 
made knife ninety cents. The levying of the im- 



232 Combinations, 

port duty, or tariff, as it is termed, does not, 
however, necessarily increase the cost of produc- 
tion of the domestic article, and the manufacturers 
may continue to sell them at fifty cents each, or 
raise the price to eighty or eighty-five cents; but 
so long as they keep the price below ninety cents, 
it is clear that the foreign-made knives cannot be 
sold in competition with them. There are cases, 
however, in which peculiar excellence, familiar 
usage, or other distinction has established a repu- 
tation for some particular make, for which people 
may be willing to pay a premium in excess of the 
price charged for other knives of the same class, 
but this set of cases forms an exception to the 
operation of the laws of trade, and should be 
carefully excluded from every discussion of the 
natural and probable results of any proposed sys- 
tem of protection. 

With the foreign-made knives thus excluded 
from our market, we have only the home manu- 
facturers to deal with. These are all men of the 
same nationality, who speak one language, are sub- 
ject to similar laws, customs and conditions, have 
a like class of employees to deal with, and sub- 
stantially equal rates of wages to pay, and it is 
merely necessary to stimulate the growth of a few 
of the larger concerns, and to squeeze out a num- 
ber of the smaller ones, in order to get the entire 
business into the hands of a few large manufac- 
turers, when it will be comparatively easy for them 
to get together, and to make the necessary agree- 
ments and arrangements for consolidation into one 
great monopoly. 



Trusts and Monopolies. 233 

It is clear, therefore, that the imposition of a 
tariff for protection tends to create conditions 
which are favorable to the formation of combina- 
tions among manufacturers, and to the exercise of 
monopolistic powers. 

Let us now inquire whether monopolistic com* 
binations have actually been formed in the produc* 
tion of those articles upon which a protective tariff" 
has been laid, for the purpose of encouraging their 
production in this country. 

Those readers who will take the trouble to ex- 
amine the schedules of the tariff law of 1897, com- 
monly known as the Dingley law, may learn upon 
just what articles import duties are levied by the 
United States, and the exact amount of these duties. 
Any attempt to enumerate these articles, even in 
general classes, would require much more space 
than this work can afford, and we must rely upon 
the reader's knowledge of the general character of 
these articles to guide him in pursuing the investi- 
gation attempted in this chapter. Some notion of 
their character and variety may, however, be de- 
rived from the general statement that, in the Ding- 
ley law, tariff duties varying in amount from ten 
per cent, on diamonds to several hundred per cent, 
on proof spirits, are levied upon nearly every article 
that is manufactured or produced in this country, 
and especially those in w T hich labor forms a large 
element of the cost. 

It would be almost impossible to arrive at any 
accurate statement of what the average of all the 
duties imposed by the Dingley law really is, owing 
to the method adopted of levying both specific and 



234 Combinations, 

ad valorem duties, and to the great number and 
variety of articles, and grades of articles enumer- 
ated, but the amount of these duties actually paid 
into the treasury of the United States on goods 
imported into this country, as shown by the 
Monthly Summary of Commerce and Finance of the 
United States for June, 1902, prepared in the Bu- 
reau of Statistics of the Treasury Department of 
the United States, has during the last five years 
ranged from forty-nine and twenty hundredths per 
cent, to fifty-two and thirty-eight hundredths per 
cent, of the value of the articles upon which it was 
paid, being in 1901 forty-nine and eighty-three 
hundredths per cent. So it seems entirely fair to 
say that the average amount of duty paid upon 
articles imported into this country is fifty per 
cent., and that will be assumed to be the true rate 
for the purpose of this chapter. 

In volume seven of the Twelfth Census of the 
United States, for 1900, Manufactures, Part One, 
page 86, there is given a table showing one hun- 
dred and eighty-five bona fide, legally chartered 
combinations that were engaged in the business of 
manufacturing in the United States during the 
year 1900, and the table is here reproduced in full, 
excepting the portions which relate to capitaliza- 
tion with which we are not now concerned, in order 
that the reader may examine for himself, and take 
such other and further means as he may choose to 
ascertain how many of them are engaged in the 
manufacture of tariff protected articles. Many 
more combinations have been organized since the 
date of the census table, such as the United States 



Trusts and Monopolies. 235 

Steel Corporation and others which might properly 
be added to this table, but it is preferred to give the 
table just as prepared by the Director of the Census, 
for it is sufficiently comprehensive for our present 
purpose, and the fact that it was not prepared 
especially to bring out the points which we have 
now in mind, will serve to make it more convinc- 
ing to the average reader. 



236 



Combinations, 

CAPITALIZATION OF INDUSTRIAL 



Name of Combination. 



Location of General Office. 



American Radiator Co. 



Alabama Consolidated Coal Equitable Bldg., Baltimore, 

and Iron Co. Maryland. 

American Axe and Tool Co. 253 Broadway, New York city. 
American Bridge Co. 100 Broadway, New York city. 

American Iron and Steel Mfg. Lebanon, Pa. 

Co., 
American Ordnance Co. 718 Crescent Ave., Bridgeport, 

Conn. 
Lake and Dearborn Sts., Chi- 
cago, 111. 
American Sheet Steel Co. Battery Park Bldg., New York 

city. 
American Steel and Wire Com- Rookery Bldg., Chicago, 111. 

pany of New Jersey. 
American Steel Casting Co. Chester, Pa. 
American Steel Hoop Co. Carnegie Bldg., Pittsburg, Pa. 

American Tin Plate Co. 24 State St., New York city. 

American Wood Working Ma- 136 Liberty St., New York city., 
chine Co. 



Atlas Tack Co. 
Central Foundry Co. 
Continental Gin Co. 
Empire Steel and Iron Co. 
Federal Steel Co. 
Herring-Hall-Marvin Co. 
International Heater Co. 
International Power Co. 



Taunton, Mass. 

116 Nassau St., New York city. 

Birmingham, Ala. 

Empire Bldg., New York city. 

Empire Bldg., New York city. 

400 Broadway, New York city. 

253 Broadway, New York city. 



International Steam Pump Co. 26 Broadway, New York city. 



National Enameling and 

Stamping Co. 
National Malleable 

Castings Co. 
National Saw Co. 
National Shear Co. 
National Steel Co. 
National Tube Co. 

Niles-Bement-Pond Co. 



81-83 Fulton St., New York 

city. 
Cleveland, Ohio. 

Newark, N. J. 

Fremont, Ohio. 

Carnegie Bldg., Pittsburg, Pa. 

Hayemeyer Bldg., New York 

136 Liberty St., New York city. 



Ohio Tool Co., of Auburn, N.Y. Columbus, Ohio." 



Otis Elevator Co. 

l'ittsburg Stove & Range Co. 

Republic Iron & Steel Co. 

Shelby Steel Tube Co. 



71 Broadway, New York city. 

610-612 Wood St., Pittsburg, 
Pa. 

Stock Exchange Bldg., Chi- 
cago, 111. 

American Trust Bldg., Cleve- 
land, O. 



Trusts and Monopolies. 237 



COMBINATIONS AND DIVIDENDS PAID. 



Date of Or- 
ganization. 



o m c 

la 



o"P ^ 
vi d o 

nSp 

P 2.03 
rt-fO O 

r 1 ** 



Dividends Paid during 

Census. 



Rate on Pre- 
ferred Stock. 



Rate on Com- 
mon Stock. 



July 10, 1899.. . 4 $5,000,000 7 per cent. None. 



Dec. 1, 1889.. 
April 14, 1900. . 
Aug. 21, 1899. . 

Dec. 31, 1895. . 

Feb. 10, 1899.. 

March 28, 1900. 

Jan. 13, 1899.. 

Feb. 23, 1894 . . 
April 14, 1899. . 
Dec. 15, 1898. . 
Nov. 20, 1897. 

June 1, 1891. .. 
July 15, 1899.. 
Nov. 27, 1899. . 
March 14, 1899. 
■Sept. 9, 1898.. 

June, 1892 

July 1, 1898.. 
Jan. 14, 1899. . 
March 24, 1899. 
Jan. 29, 1899.. 

Jan. 30, 1891.. 

May 23, 1890.. 
May 23, 1898.. 
Feb. 25, 1899. . 
June 16, 1899. 

Aug. 11, 1899 . . 
Sept. 12, 1893. . 
Nov. 28, 1898. . 
Sept. 1, 1899.. 

May 3, 1899 . . . 

Feb. 9, 1900.. 



6 

24 

5 



2,000,000 
70,000,000 
20,000,000 

2,500,000 



9 10,000,000 

29 53,000,000 

42 90,000,000 

6 4,200,000 

15 33,000,000 

65 50,000,000 

8 4,000,000 

4 700,000 

14 14,000,000 

6 3,000,000 

10 5,000,000 

17 200,000,000 

2 

2 

2 

6 
10 



3,300,000 

1,800,000 

8,000,000 

27,500,000 

30,000,000 

3,000,000 



4 1,000,000 

3 3,000,000 
22 59,000,000 
26 80,000,000 

4 8,000,000 
2 350,000 
6 11,000,000 
8 2,000,000 

35 55,000,000 

14 15,000,000 



None. 
None. 

5 per cent. 

None. 
7 per cent. 

None. 

7 per cent. 

7 per cent. 

7 per cent. 

7 per cent. 

None. 

None. 

6 per cent. 
6 per cent. 

None. 

6 per cent. 

6 per cent. 

7 per cent. 



4 per cent. 

7 per cent. 
7 per cent. 

6 per cent. 

6 per cent. 

7 per cent. 

7 per cent. 
ZY2 per cent. 



None. 

20 per cent. 

None. 

None. 

None. 

None. 

5 per cent. 

6 per cent. 
None. 
None. 
None. 

None. 
None. 
None. 

None. 

3%2per cent. 
None. 

None. 
None. 
None. 

None. 

None. 

None. 
None. 

None. 
None. 
None. 
None. 

None. 

None. 



23% 



Combinations, 

CAPITALIZATION OF INDUSTRIAL 



Name of Combination. 



Location of General Office. 



Standard Chain Co. First National Bank BIdg. r 

Pittsburg, Pa. 
Steel Tired Wheel Co. New York city. 

Susquehanna Iron & Steel Co. Columbia, Pa. 
United Shoe Machinery Go. 205 Lincoln St., Boston, Mass. 
United States Cast Iron 80 Broadway, New York city- 

Pipe & Foundry Co. 
Virginia Iron, Coal and Coke Bristol, Va. — Tenn. 

Co. 
Wheeling Steel & Iron Co. Wheeling, West Va. 

American Beet Sugar Co. 32 Nassau St., New York city. 

American Caramel Co. 

American Cereal Co. 



American Chicle Co. 

American Pastry & Manufac 

turing Co. 
American Preserve Co. 

American Sugar Refining Co. 
California Fruit Canners' 

Ass'n. 
Columbia River Packers' 

Ass'n. i 

Continental Biscuit Co. 
Continental Creamery Co. 
Glucose Sugar Refining Co. 

National Biscuit Co. 
National Rice Milling Co. 

National Sugar Refining Co. 
Pacific Coast Biscuit Co. 
Pillsbury-Washburn Flour 

Mills Co., Ltd. 
Boyal Baking Powder Co. 

Seacoast Packing Co. 
Sperry Flour Co. 

Standard Sardine Co. 
United States Flour Milling 
Co. 



20 E. Allen St., Philadelphia, 
Pa. 

1340 Monadnock Bldg., Chi- 
cago, 111. 

Park Row Bldg., New York 
city. 

Broadway, Thirty-sixth St., 
and Sixth Ave., N. Y. city. 

950 Beach St., Philadelphia, 
Pa. 

117 Wall St., New York city. 

203 California St., San Fran- 
cisco, Cal. 

Astoria, Ore. 

Chicago, 111. 

523 Jackson St., Topeka, Kan. 

845 Rookery Bldg., Chicago, 

205 La Salle St., Chicago, I1L 

542 Montegut St., New Or- 
leans, La. 

109 Wall St., New York city. 

Seattle, Wash. 

301 Guaranty Bldg., Minne- 
apolis, Minn. 

100 William St., New York 
city. 

Royal Ins. Bldg., Chicago, I1L 

134 California St., San Fran- 
cisco, Cal. 

Eastport, Me. 

207 Produce Exchange, New 
York city. 



Trusts and Monopolies. 



239 



COMBINATIONS AND DIVIDENDS PAID. 



ffS3 

£p£ 
« 3 3 
Date of Or- c-3"^ 

§0 



ganization. 



CP H 

ero - 

P 2.02 



Feb. 2, 1900.. 11 $3,000,000 



Jan. 26, 18D7.. 

June, 1899 

Feb. 8, 1899. 



March 13, 1899. 17 
Jan. 2, 1899... 21 



April 16, 1892.. 
March 24, 1899. 

March 28, 1898. 

June, 1891 

June 30, 1899. . 

July 7, 1899.. 

Dec. 21, 1837.. 

Jan. 10, 1891. . 
July 30, 1899.. 



7 
4 

2 

6 

6 

6 

1 

5 

20 



June 15, 1898. . 5 

March 1, 1900.. 13 

Aug. 3, 1897.. 5 

Feb. 3, 1898.. 95 

May, 1892 5 

June 2, 1900. . 3 

Sept. 15, 1899.. 12 

Oct. 18, 1899.. 5 



April 5, 1899.. 36 

Sept., 1892 11 

March 16, 1899. 25 

April 27, 1899.. 16 



Dividends Paid during 
Census. 



Rate on Pre- Rate on Com- 
ferred Stock. mon Stock. 



4,000,000 

1,500,000 

25,000,000 

30,000,000 

10,000,000 

5,000,000 
20,000,000 

2,000,000 

3,400,000 

9,000,000 

3,000,000 

125,000 

10,000,000 
3,500,000 



Rate c_ 

mon Stock. 

None. None. 

3 per cent. 3 per cent. 

18 per cent* 
6 per cent. 8 per cent* 
3^ per cent. None. 

None. 



Feb., 1899 4 2,000,000 



500,000 

500,000 

40,000,000 

55,000,000 
5,000,000 

20,000,000 
4,000,000 
4,850,000 



March 1, 1899 3 20,000,000 



8,000,000 
10,000,000 

5,000,000 
25,000,000 



8 per cent. 

6 per cent. None. 

8 per cent. None. 

8 per cent. 

6 percent. 8% per cent* 
None. None. 

6 per cent. 

7 per cent. 9 per cent. 

60 cts. per 
share monthly. 
2^2 per cent* 



None 



7 per cent. 



iNone. 

7 per cent. 6 per cent. 

7 per cent. 4 per cent. 
None. None. 

None. None. 

None. None. 

8 per cent. 4 per cent. 

6 per cent. None. 

None. None. 

1^4 per cent. 

None. None. 

None. None. 



I 



240 Combinations, 

CAPITALIZATION OF INDUSTRIAL 
Name of Combination. Location of General Office. 



American Agricultural Chemi-26 Broadway, New York city. 

cal Co. 
American Cotton Oil Co. 27 Beaver St., New York city. 

American Linseed Co. 100 William St., New York 

city. 
Barrett Manufacturing Co., 1205 Land Title Bldg., Phil- 

The. adelphia, Pa. 

California Powder Works. 330 Market St., San Fran- 

cisco, Cal. 
The Celluloid Co. 30-36 Washington PI., New 

York city. 
Continental Cotton Oil Co. 45 Cedar St., New York city. 
The Fisheries Co. 135 Front St., New York city. 

General Chemical Co. 25 Broad St., New York city. 

Grasselli Chemical Co. 784 The Arcade, Cleveland, O* 

National Salt Co. 26 Broadway, New York city. 

National Starch Manufactur-1 Broadway, New York city. 

ing Co. 
Standard Oil Co. 26 Broadway, New York city. 

United Starch Co. 24 State St., New York city. 

Virginia-Carolina Chemical Crenshaw Warehouse, Rich- 
Co. mond, Va. 
Amalgamated Copper Co. 52 Broadway, New York city. 
American Brass Co. Waterbury, Conn. 
American Shot & Lead Co. 902 Security Bldg., St. Louis, 

Mo. 
American Smelting & Refining 71 Broadway, New York city. 

Co. 
American Type Foundries Co. 25 William St., New York 

city. 
Cherokee-Lanyon Spelter Co. Laclede Bldg., St. Louis, Mo. 
International Silver Co. Meriden, Conn. 

Magnus Metal Co. 830 Ellicott Sq., Buffalo, N. Y. 

National Lead Co. 100 William St., New York 

city. 
New Jersey Zinc Co. 71 Broadway, New York city. 

Standard Sanitary Manufac- 531-533 Wood St., Pittsburg, 

turing Co. Pa. 

American Distributing Co. 27 William St., New York 

city. 
American Malting Co. 63d St. & East River, New 

York city. 
American Spirits Manufactur- 27 William St., New York 

ing Co. city. 

California Wine Association. 661-671 3d St., San Franciscou 

Cal. 



Trusts and Monopolies. 241 



COMBINATIONS AND DIVIDENDS PAID. 



Date of Or- 
ganization. 



£22 

o ST a 



§0 



OtTp 

tro — 

P 2.0Q 



Dividends Paid during 
Census. 



Rate on Pre- 
ferred Stock, 



Rate on Com- 
mon Stock. 



April, 1899.... 27 $40,000,000 6 per cent. None. 



Oct. 14, 1899.. 57 

Dec. 5, 1898.. 47 

Jan. 1, 1896.. 12 

Dec. 28, 1861.. 2 

Nov. 28, 1890.. 1 

April 2, 1890... 7 

May 25, 1900.. 5 

Feb. 14, 1809.. 17 

June 10, 1885. . 7 

March 18, 1899 31 

April 12, 1890. 22 

Aug. 1, 1882... 26 

Aug. 31, 1890. . 3 

Sept. 12, 1895.. 33 

April 27, 1899. 4 
March 1, 1899... 4 

Aug. 27, 1890.. 12 

April 4, 1899.. 13 

Feb. 8, 1892.. 12 

Jan. 1, 1896... 14 

Nov. 19, 1898.. 13 

June, 1899 5 

Dec. 7, 1891... 17 

June 30, 1880.. 8 

Jan. 1, 1900.. 6 

Aug. 10, 1891 . . 2 

Sept., 1897 26 

Aug. 22, 1895.. 13 

Aug. 10, 1894.. 9 



34,799,400 
33,500,000 

5,000,000 

1,500,000 

6,000,000 

6,000,000 

3,000,000 

25,000,000 

7,500,000 

12,000,000 

10,500,000 

110,000,000 

6,000,000 

50,000,000 

75,000,000 

20,000,000 

3,000,000 

65,000,000 

4,000,000 

600,000 

20,000,000 

3,000,000 

30,000,000 

10,000,000 
5,000,000 

5,000,000 

30,000,000 

35,000,000 

10,000,000 



6 per cent. 

7 per cent. 



7 per cent. 
None. 

6 per cent. 

7 per cent. 
4 per cent. 

6 per cent. 
3 per cent. 

8 per cent. 



7 percent. 



1 % per cent. 
8 percent. 
7 per cent. 

None. 



3% per cent. 
None. 



4 per cent. 
None. 

10 per cent. 

12 per cent. 

6^4 per cent. 

6 per cent. 
None. 

4 per cent. 

7 per cent. 
None. 
None. 

45 per cent. 
None. 

4 per cent. 

8 per cent. 

5 per cent. 
None. 

None. 

4 per cent. 

None. 
None. 

10 per cent. 
1 per cent. 

6 per cent. 
None. 

None. 

None. 

None. 

6 per cent. 



242 



Combinations, 

CAPITALIZATION OF INDUSTRIAL 



Name of Combination. 



Location of General Office. 



Chicago Breweries, Ltd. 
Chicago Consolidated Brewing 

& Malting Co. 
Cleveland & Sandusky Brewing 

Co. 
Connecticut Breweries Co., 

Ltd. 
Consumers' Brewing Co. 
Erie Brewing Co. 
Evansville Brewing Ass'n. 

Indianapolis Brewing Co. 

Kentucky Distilleries and 

Warehouse Co. 
Maryland Brewing Co. 

New Orleans Brewing Co. 
New York & Kentucky Co. 
Paterson Brewing & Malting 

Co. 
Pennsylvania Central Brewing 

Co. 
Pittsburg Brewing Co. 
St. Louis Brewing Ass'n. 

San Francisco Breweries, Ltd. 

Seattle Brewing & Malting Co. 
Springfield Breweries, Ltd. 
Springfield Breweries Co. 
Standard Distilling and Dis- 
tributing Co. 
United Breweries Co. 

United States Brewing Co., 

Ltd. 
United States Brewing Co. 
American Bicycle Co. 

American Car & Foundry Co. 

Tressed Steel Car Co. 

r>7l!maa Co., The. 
Standard Wheel Co. 
Southern Car & Foundry Co. 



Chicago, 111. 

1422 Monadnock Bldg., Chi- 
cago, 111. 
Cleveland, Ohio. 

Bridgeport, Conn. 

Philadelphia, Pa. 

Erie, Pa. 

5th & Ingle Sts., Evansville, 
Ind. 

820 High St., Indianapolis, 
Ind. 

27 William St., New York 
city. 

Brewers' Exchange Bldg., Bal- 
timore, Md. 

New Orleans, La. 

67 Lake Ave., Rochester, N. Y. 

Paterson, N. J. 

431 N. Seventh St., Scranton, 
Pa. 

Pittsburg, Pa. 

Wainwright Bldg., St. Louis, 
Mo. 

240 Second St., San Fran- 
cisco, Cal. 

Seattle, Wash. 

Springfield, Ohio. 

Springfield, Mass. 

27 William St., New York 
city. 

Stock Exchange Bldg., Chi- 
cago, 111. 

788 Broad St., Newark, N. J. 

Monadnock Bldg., Chicago, 111. 
Park Row Bldg., New York 

city. 
Lincoln Trust Bldg., St. Louis, 

Mo. 
Tradesmen's Bldg., Pittsburg, 

Pa. 
309 W. Third St., Chicago, I1L 
Terre Haute, Ind. 
Birmingham, Ala. 



Trusts and Monopolies. 



243 



COMBINATIONS AND DIVIDENDS PAID. 



Date of Or- 
ganization. 



S22 

o p c 

O 
§0 



rr fD O 



April, 1889 2 $3,000,000 

June, 1890 4 5,000,000 

June 7, 1898. . . 9 6,000,000 



1890 



Oct. 26, 1896.. 
March 20, 1899. 
March, 1894. . . 



700,000 

3,800,000 

1,500,000 

400,000 



Dividends Paid during 
Census. 



Rate on Pre- Rate on Com- 
ferred Stock. mon Stock. 

% per cent. 

6 per cent. None. 
8 per cent. None. 

None. 

7 per cent. None. 

None. 



Feb. 3, 1899... 

Dec. 23, 1898.. 

Oct. 6, 1899... 
Jan. 25, 1900. . 
July 1, 1899... 



50 

16 

4 
3 
6 



32,000,000 
6,500,000 

2,790,000 

2,000,000 
3,000,000 



Aug. 23, 1897.. 12 5,600,000 



Feb. 4, 1899. 
June 1, 1889. 

April 30,1899.. 

1893 

June 1, 18' '0. . 
April 19, 1899.. 
June 27, 1898.. 

Aug. 8, 1898.. 

1889 



18 
11 



Sept. 1, 1890.. 
May 12, 1889.. 

Feb. 20, 1889.. 

Jan. 12, 1899.. 



Dec, 1899 

Aug. 20, 1892.. 
June 1, 1899., 



3 

11 

3 

10 

12 

5 

6 
35 

17 

4 

5 
6 
5 



13,000,000 
5,250,000 



6 1,023,300 



1,000,000 

509,250 

1,375,000 

24,000,000 

5,600,000 

3,500,000 

5,000,000 
30,000,000 

60,000,000 

25,000,000 

74,000,000 
1,000,000 
3,000,000 



None. 

6 per cent. 

None. 

7 per cent. 

None. 

7 per cent. 

$ 

None. 



8 per cent. 

8 per cent. 

None. 



8 per cent 

70 
None. 

7 per cent. 

7 per cent 



6 per cent. 
None. 



None. 

None. 

None. 
None. 
None. 

None. 



4 per cent. 
2.70 per share. 

None. 

6 per cent. 
6 per cent. 
None. 
None. 

None. 

5 per cent. 

cts. per share- 
None. 

None. 

6 per cent. 

8 per cent. 

None. 

None. 



244 



Combinations, 

CAPITALIZATION OF INDUSTRIAL 



Name of Combination. 



Location of General Office. 



American Snuff Co. 
American Tobacco Co. 
Continental Tobacco Co. 
Havana- American Co., The 

American Felt Co. 

American Grass Twine Co. 
American Thread Co. 
American Woolen Co. 



Ill Fifth Ave., New York city. 
Ill Fifth Ave., New York city. 
Ill Fifth Ave., New York city. 
1322 Avenue A, New York 

city. 
110-112 E. Thirteenth St., 

New York city. 
35 Wall St., New York city. 
260 Broadway, New York city. 
Ames Bldg., Boston, Mass. 
Mt. Vernon-Woodberry CottonEquitable Bldg. Baltimore, Md. 

Duck Co. 
New England Cotton Yarn Co. 37 N. Water St., New Bed- 
ford, Mass. 



17 State St., New York city. 
320 Broadway, New York city. 
92 Cliff St., New York city. 
Ridgway, Pa. 
Sheffield, Pa. 
Williamsport, Pa. 
26 Ferry St., New York city. 
Fourth Ave. & Nineteenth St., 

New York city. 
84 Van Buren St., Chicago, 

111. 
Springfield, Mass. 
30 Broad St., New York city. 
121-127 Crosby St., New York 

city. 
1602 Fisher Bldg., Chicago, 

Springfield, Mass. 

22 S. Fifteenth St., Philadel- 
phia, Pa. 

American Clay Manufacturing Akron, Ohio. 
Co. 

200 Ninth St., Pittsburg, Pa. 

1002 Atlantic Trust Bldg., 
Baltimore, Md. 

Chamber of Com. Bldg., Chi- 
cago, 111. 

41 Park Row Bldg., N. Y. city. 

Telephone Bldg., Pittsburg, 
Pa. 

Carnegie Bldg., Pittsburg, Pa. 

Neeren Bldg., Pittsburg, Pa. 



Standard Rope & Twine Co. 
United States Finishing Co. 
American Hide & Leather Co. 
Elk Tanning Co. 
Penn Tanning Co. 
Union Tanning Co. 
United States Leather Co. 
American Lithographic Co. 

American Straw Board Co. 

American Writing Paper Co. 
International Paper Co. 
National Wall Paper Co. 

Union Bag & Paper Co. 

United States Envelope Co. 
American Cement Co. 



American Window Glass Co. 
Baltimore Brick Co. 

Illinois Brick Co. 

International Pulp Co. 
Macbeth-Evans Glass Co. 

National Fire Proofing Co. 
National Glass Co. 



Trusts and Monopolies. 



245 



COMBINATIONS AND DIVIDENDS PAID. 



Date of Or- 
ganization. 



3^3 



o 

§0 



CP ha 
VI C o 



P 2.&Q 
p-s sj t-f- 

2 0*2. 



March 12, 1900. 
Jan. 21, 1890. . 
Nov. 28, 189S. 
Nov. 9, 1899.. 

Feb. 9, 1S99. .. 

June 8, 1899. .. 
March 10, 1898. 
March 29, 1899. 
Aug. 29, 1S99.. 



9 $25,000,000 

15 70,000,000 

9 100,000,000 

8 10,000,000 

5 5,000,000 

3 15,000,000 

10 12,000,000 

30 65,000,000 

7 9,500,000 



July 15, 1899... 9 11,500,000 



Nov. 1, 1895. . . 
July 1, 1899.. 
Aug. 29, 1899. . 
April 17, 1893. 
April 13, 1893. 
April 13, 1893.. 
Feb. 25, 1893. . 
Jan. 1, 1896. . . 



12,000,000 

3,000,000 

35,000,000 

12,500,000 

13,500,000 

10,000.000 

128,000,000 

4,000,000 



May 29, 1889.. 17 6,000,000 



July 25, 1899.. 
Jan. 31, 1898. . 
June, 1892 



25 
32 

18 



25,000,000 
45,000,000 
30,000,000 



Feb. 27, 1899.. 17 27,000,000 



June, 1808 

March 11, 1890. 



5,000,000 
500,000 



March 1, 1900.. 28 10,000,000 



July 31, 1899.. 
June 23, 1899. . 



39 

28 



17,000,000 
2,100,000 



Dividends Paid during 
Census. 

Rate on Pre- Rate on Com- 
ferred Stock. mon Stock. 

None. None. 

8 per cent. 6 per cent. 

7 per cent. None. 

7 per cent. None. 

6 per cent. None. 

None. 

5 per cent. 10 per cent* 

7 per cent. None. 

1% per cent- 

7 per cent. None. 

None. 

7 per cent. None. 

None. None. 

$1.50 per share. 

None. 
$1.50 per share, 

6 per cent. None. 

None. 

3 per cent. 

None. None. 

6 per cent. None. 

None. 

7 per cent. None. 

7 per cent. None. 

32 Mj percent* 

None. 

7 per cent. None. 
6 per cent. None. 



Feb. 13, 1900.. 36 9,000,000 



March, 1893... 
July 7, 1899... 

Dec. 20, 1899.. 
Nov. 1, 1899... 



1 5,000,000 
7 2,200,000 



5 
19 



2,000,000 
4,000,000 



None. None. 

4 per cent. None. 
7 per cent. 4 pe 



per cent* 



7 per cent. None. 
None. None. 



246 



Combinations, 

CAPITALIZATION OF INDUSTRIAL 



Name of Combination. 



Location of General Office. 



Carnegie Bldg., Pittsburg, Pa. 
Wheeling, V. Va. 
309 N. Clinton Ave., Trenton, 
N. J. 
United States Clay Manufac- Fifth & Liberty Sts., Pitts- 



Pittsburg Plate Glass Co, 
Suburban Brick Co. 
Trenton Potteries Co. 



turing Co. 
United Glass Co. 

Western Stone Co. 



burg, Pa. 

Ninth & Bingham Sts., Pitts- 
burg, Pa. 

Chamber of Com. Bldg., Chi- 
cago, 111. 

Ill Fifth Ave., New York city. 



American School Furniture 

Co. 

Brunswick-Balke-Collender Co. 860 Broadway, New York city. 
Diamond Match Co. 504 Pullman Bldg., Chicago, 

Heywood Bros. & Wakefield Co. Gardner, Mass. 
National Casket Co. Oneida, New York. 

National Cooperage and Wood- Peoria, 111. 

ware Co. 
United States Bobbin & Shut- 270 Butler Exchange Bldg., 



tie Co 
Yellow Pine Co. 
American Glue Co. 



Providence, R. I. 
16 Beaver St., New York city. 
419 Atlantic Ave., Boston, 

Mass. 
9-13 Mercer St., New York 

city. 
131 E. Twenty-third St., New 

York city. 
120 Viaduct, Cleveland, Ohio. 
278 Congress St., Boston, 

Mass. 
15 Exchange PL, Jersey City, 

N. J. 
100 William St., New York 

city. 
Thirteenth and Pine Sts., 

Pittsburg, Pa. 
Consolidated Railway ElectriclOO Broadway, New York city 
Lighting & Equipment Co. 



American Hard Rubber Co. 

American Ice Co. 

American Shipbuilding Co. 
American Soda Fountain Co. 

Central Fireworks Co. 

Commonwealth Roofing Co. 

Consolidated Ice Co. 



Electric Boat Co. 
General Aristo Co. 
National Carbon Co. 
Pittsburg Coal Co. 
Rubber Goods Manuf. Co. 
United States Rubber Co. 
United States Whip Co. 



100 Broadway, New York city. 

343 State St., Rochester, N. Y. 

Lock Drawer L., Cleveland, O. 

Pittsburg, Pa. 

New Brunswick, N. J. 

9 Murray St., New York city. 

Westfield, Mass. 



Trusts and Monopolies. 247 



COMBINATIONS AND DIVIDENDS PAID. 



Date of Or- 
ganization. 


Total Stock 
authorized 
by Charter. 

Number of 
Plants Con- 
trolled. 


Dividends Paid during 
Census. 

Rate on Pre-Rate of Com- 
ferred Stock. mon Stock. 


April 1, 1895.. 
Dec. 29, 1898.. 
May 27, 1892.. 


10 
5 
6 


10,000,000 

200,000 

3,000,000 


12 per cent. 
None. 


6 per 
6 per 
None. 


cent, 
cent. 


Dec. 26, 1899.. 


2 


240,000 




None. 




Feb. 12, 1891.. 


13 


5,000,000 


None. 


None. 




Sept. 16, 1889.. 


1 


2,250,000 




None. 




March 13, 1899. 


17 


10,000,000 


None. 


None. 




Jan. 30, 1884.. 
Feb. 13, 1889. . 


2 
9 


1,500,000 
15,000,000 




6 per 
10 per 


cent, 
cent. 


March 16, 1897. 
July 1, 1890.. 
Oct. 21, 1899.. 


4 

11 

6 


6,000,000 

6,000,000 

500,000 


8 percent. 
None. 


None. 
5 per 


cent. 


July 31, 1899.. 


7 


2,000,000 


7 per cent. 


None. 




Nov. 12, 1891.. 
July 7, 1894... 


3 
6 


2,500,000 
1,800,000 


None. 
8 percent. 


None. 
None. 




April 21, 1898. 


3 


2,500,000 




7 per cent. 


March 11, 1899. 


7 


40,000,000 


6 per cent. 


4 per 


cent. 


March 16, 1899. 
Feb. 4, 1891... 


11 

7 


30,000,000 
3,750,000 


7 per cent. 
3 per cent. 


None. 
None. 




June 8, 1896.. 


6 


3,500,000 


3% percent. 


None. 




June 6, 1899. . 


6 


500,000 


3 % per cent. 


None. 




April 1, 1899.. 


7 


4,000,000 


6 per cent. 


4 per 


cent. 


Jan. 6, 1900. . . 


3 


16,000,000 




None. 




Feb. 7, 1899 . . . 
Aug. 4, 1899.. 
Jan. 16, 1899.. 
Sept. 1, 1899. . 
March 26, 1899. 
March 30, 1892. 
Dec. 29, 1892.. 


3 
5 
5 
5 

14 
5 
4 


10,000,000 
5,000,000 
10,000,000 
64,000,000 
50,000,000 
50,000,000 
2,200,000 


None. 
7 per cent. 
7 per cent. 
7 per cent. 
7 per cent. 
7 per cent. 
12 per cent. 


None. 

10 per cent. 

None. 

None. 

None. 

3 per cent. 

None. 



248 Combinations, 

It may be suggested that some of these combina- 
tions are protected by internal revenue pro- 
visions as well as by import duties, and we are will- 
ing to admit this. We are also willing to admit 
that other circumstances contribute to aid in the 
formation and protection of other combinations, and 
that some of them receive no tariff protection what- 
ever, for we wish it to be clearly understood that 
it is not our present purpose to attempt to prove 
that the protective tariff has been the cause, or even 
the chief among many circumstances which have 
aided in the formation of monopolistic combina- 
tions. The purpose of the present point of our in- 
quiry is merely to determine whether manufactur- 
ers, who have been afforded protection by the tariff 
have entered into combinations the presumptive 
purpose of which is to exhort larger profits from the 
people. 

By merely looking over the names of the combi- 
nations shown in the table, it will be seen that 
these are sufficient to identify them with the 
branches of industry with which the protective 
tariff is always associated in the mind of every 
business man; and upon a careful comparison of 
the table with the schedules of the tariff law, 
it will be found that of the one hundred 
and eighty-five combinations shown, one hun- 
dred and seventy-six were engaged in the 
manufacture of articles which are protected 
by the tariff, while only nine were en- 
gaged in the manufacture of articles to which no 
tariff protection is afforded. A more convincing 
answer to the query, have combinations been formed 
among manufacturers engaged in the production 



Trusts and Monopolies. 249 

of tariff protected articles, can hardly be devised, 
than that afforded by the foregoing table prepared 
by the Census Department. 

It appearing, therefore, that manufacturers 
whose products are protected by tariff duties, have 
formed combinations for the purpose of controlling 
prices, for the power to control prices is the natural 
result of these combinations, and people must al- 
ways be presumed to have intended to do that which 
is the natural and probable result of their acts ; let 
us inquire whether they have misused the pro- 
tection afforded them, to the detriment of the peo- 
ple at large. 

The purpose of the government in levying the 
protection duties was to increase the number of 
factories in the country, the number of persons em- 
ployed, the wages of the employees, and to encour- 
age home manufacturers until such time as they 
could compete with the manufacturers of foreign 
nations. The purpose of the combinations, on the 
other hand, is to reduce the number of factories 
in operation, the number of persons employed, the 
amount of wages to be paid, and to enter into com- 
petition with the manufacturers of Europe, while 
still retaining the protection of the tariff. 

Thus in the one hundred eighty-five combina- 
tioES shown in the table, there were two thousand 
two hundred sixteen plants controlled, of which 
one hundred seventy-six were idle during the year 
1900, as shown by the same volume of the Census, 
page 83. The reduction of the number of plants 
to be operated is one of the chief sources of the 
economies effected by combinations, for it carries 
with it the reduction of the number of employees. 



250 Combinations, 

The number of wage earners employed by these 
one hundred eighty-five combinations, is shown by 
the same authority to have been only eight and four- 
tenths per cent, of the total number of wage earners 
employed in all manufactories, whereas their pro- 
duct was fourteen and one-tenth per cent, of the out- 
put of all establishments, and the wages paid by 
these combinations was only nine and six-tenths 
per cent, of the total wages paid "by all manufac- 
turers. 

Thus we see that the purposes and results of 
these large trusts and combinations are directly 
opposite to those which were sought to be secured 
by the protective tariff, and that the protection en- 
joyed by them has been greatly abused, and di- 
verted from the purposes for which it was origin- 
ally granted. 

The ability of the manufacturers of the United 
States to compete with those of any other nation 
has been testified to in many ways. 

The frequent appearance in newspapers and mag- 
azine articles, of allusions to the inroads which the 
American manufactures are making into the mark- 
ets of Europe, is an evidence that the exportation 
of American-made goods has become sufficiently 
large to , attract the serious attention of writers at 
home and abroad. 

The often repeated statement that many of the 
largest manufacturing establishments of Europe 
send representatives to visit and study the indus- 
trial institutions of this country, gives assurance 
that the attention of the foreign producers has been 
attracted, and that they see in our factories, com- 
petitors whose ways must be studied with care if 



Trusts and Monopolies. 2511 

they do not wish to be outdone by them. This so- 
licitude on the part of foreigners must be solely 
due to apprehensions of the competition of our 
manufacturers abroad, for the amount of our tariff 
duties would preclude the possibility of their ever 
thinking of driving competition into our home 
market. 

The well known fact that many of the largest 
manufacturing institutions of Europe have been re- 
modeled and equipped with American machinery 
and appliances, at a cost of vast sums of money, 
bears most substantial testimony to the conviction 
in the minds of the foreign producers that they 
must either prepare to meet our manufacturers with 
their own machinery or submit to be outsold by 
them. 

The common experience of travelers in Europe, 
in finding American-made articles for sale in every 
large city, and in use among the people, shows how 
general the exportation of the products of our fac- 
tories has become ; and the report of the Secretary 
of the Treasury of the United States, which shows 
that the exports of American manufactures for the 
years 1900, 1901 and 1902 have exceeded four hun- 
dred million dollars per annum, affords indisputa- 
ble evidence of the magnitude to which the exporta- 
tion of American-made articles has attained. 

The magnitude of these figures must convince 
the reader that the export trade of the American 
manufacturers has passed far beyond the experi- 
mental stage, and, by comparing these figures with 
the exports of Great Britain, Germany and France, 
it will be seen that this country is rapidly taking 



252 Combinations, 

rank with the leading nations of Europe, as an 
exporter of manufactured products. 

The character and variety of the manufactured 
articles exported from this country for sale in for- 
eign markets, can, perhaps, best be brought home to 
the reader by presenting a list, taken from the 
Monthly Summary of Commerce and Finance of 
ithe United States for June, 1902, showing the arti- 
cles of domestic manufacture exported from the 
United States during the year 1901. 

EXPORTS OF DOMESTIC MANUFACTURE FROM THE 

UNITED STATES, BY PRINCIPAL ARTICLES 

DURING THE YEAR ENDING 

JUNE 30, 1901. 

Articles. Total. 

Agricultural implements $16,313,434 

Aluminum, and manufactures of 221,249 

Art works : Painting and statuary 344,287 

Asbestos 135,258 

Babbitt metal 102,909 

Asphaltum and manufactures 97,851 

Blacking 799,895 

Books, maps, etc 3,472,343 

Brass and manufactures of 2,007,450 

Bricks 656,626 

Brooms and brushes 254,047 

Candles 236,547 

Cars, carriages, etc 10,920,931 

Celluloid and manufactures 211,781 

Cement 438,915 

Chemicals, drugs, dyes, etc 13,312,631 

Clocks and watches 2,340, iol 

Coke 1,433,197 

Coffee and cocoa, prepared 333,036 

Copper manufactures 43,267,021 

Cork manufactures 36,717 

Cotton manufactures 20,272,418 

Dental goods 252,418 

Earthen, stone and china ware 512,913 

Fertilizers, other than crude 377,567 

Emery wheels 163,774 

Fiber manufactures 4,302,876 

Furniture of metal 271,289 

Glass and glassware 2,126,309 

Gunpowder and other explosives 1,712,102 

India rubber manufactures 3,659,361 



Trusts and Monopolies. 253 

Ink $291,225 

Scientific instruments 7,361,231 

Iron and steel, and manufactures thereof, as 
follows : 

Iron ore 175,817 

Bar iron 884,0.)4 

Ferro-manganese 1,296 

All other 3,763,287 

Scrap and old, fit only for remanufacture. . . . 544,394 
Bars or rods of steel : 

Wire rods 336,680 

All other 2,651,089 

Billets, ingots, and blooms 3,158,239 

Hoop, band and scroll 167,942 

Ingots, bars and rods of steel rails for rail- 
ways : 

Iron 32,567 

Steel • 10,841,189 

Sheets and plates: 

Iron 498,964 

Steel 1,752,873 

Tin plates, terne plates, and taggers tin 66,550 

Structural iron and steel 3,357,023 

Wire 4,104,563 

Builders' hardware, saws, and tools : 

Locks, hinges and other builders' hardware.... 5,569,903 

Saws 327,859 

Tools not elsewhere specified 3,306,751 

Car wheels 203,396 

Castings, N. E. S 1,135,453 

Cutlery : 

Table 33,647 

All other 200,640 

Firearms 958,324 

Machinery, machines, and parts of : 

Cash registers 873,121 

Electrical 5,812,715 

Laundry machinery 479,274 

Metal workings 4,054,313 

Printing presses and parts of 1,005,929 

Pumps and pumping machinery 2,187,246 

Sewing machines, and parts of 4,095,663 

Shoe machinery 953,898 

Steam engines, and parts of : 

Fire 23,370 

Locomotives 4,039,006 

Stationary 901,888 

Boilers and parts of engines 1,696,385 

Typewriting machines, and parts of 2,827,329 

All other 20,864,352 

Total machinery 49,814,489 

Nails and spikes : 

Cut 575,285 

Wire 982,313 

All other, including tacks 257,700 

Pipes and fittings 5,139,895 



2£4 Combinations, 

Safes $112,068 

Scales and balances 532,640 

Stoves, ranges, and parts of 548,716 

All other manufactures of iron and steel 15,459,491 

Total iron and steel, not including ore 117,319,320 

Jewelry and gold and silver manufactures 1,455,487 

Lamps, chandeliers, etc 1,021,435 

Lead manufactures 671,679 

Leather, and manufactures of 27,923,653 

Lime 29,562 

Malt liquors 1,723,025 

Marble and stone manufactures 1,544,594 

Matches 88,739 

Musical instruments , 2,780,796 

Oil cloths 172,635 

Oils, refined or manufactured 65,021,591 

Paints, pigments and colors 2,036,34$ 

Paper, manufactures of 7,438,901 

Paraffin and paraffin wax 6,857,288 

Perfumery and cosmetics 380,9f!4 

Photographic materials 1,998,445 

Plated ware 517,208 

Silk manufactures (and waste) 253,816 

Soap 1,569,180 

Spirits, distilled 3,054,723 

Starch 2,005,865 

Straw and palm leaf manufactures 412,668 

Sugar, refined and confectionery 981,356 

Tin, and manufactures of 516,343 

Tobacco manufactures 5,092,603 

Toys 280,546 

Trunks, valises, etc 115,881 

Varnish 611,459 

Vessels sold abroad 112,906 

Wood manufactures 11,099,643 

Wool manufactures 1,542,733 

Zinc manufactures 965,510 

All other articles 6,317,480 

Total .$412,155,066 

The table shown does not include the exporta- 
tion of breadstuffs, comprising bread, wheat flour, 
corn meal, oatmeal, grains of all kind, and all 
preparations of food made from them, or meat, 
dairy products, and other articles, all of which 
amount to hundreds of millions of dollars, but 
which are included, in the statistics prepared by 
the Treasury Department, under the head of agri- 
cultural products. 



Trusts and Monopolies. 255 

The exports of domestic manufactures, strictly 
so-called, from the United States during the last 
thirteen years have amounted to $3,389,931,951, 
as follows: $151,102,376 in 1890, $168,927,315 in 
1891, $158,510,937 in 1892, $158,023,118 in 1893, 
$183,728,808 in 1894, $183,595,743 in 1895, $228,- 
571,178 in 1896, $277,285,391 in 1897, $290,697,- 
354 in 1898, $339,592,146 in 1899, $433,851,756 
in 1900, $412,155,066 in 1901, $403,890,763 in 
1902. 

With this long list before us, of articles which 
have actually been exported from this country and 
sold in foreign markets in competition with foreign 
producers, it would seem to be established beyond 
the possibility of contradiction that the manufac- 
turers of this country are now able to compete with 
those of the world in the production of these arti- 
cles. 

The fact that large quantities of the products of 
the American factories have been sold abroad — hav- 
ing been, we believe, now fully established, we 
are led to inquire by whom has this great volume 
of goods been created, and who is it that has thus 
risen from the position of mere local producers to 
the rank of manufacturers of international repu- 
tation, and to be competitors in the markets of the 
world ? 

The combinations recently formed, and still 
forming, among manufacturers are steadily reduc- 
ing the cost of production to the lowest possible 
point ; it has been claimed by the promoters of com* 
binations that by reducing the cost of production, 
they would be enabled to sell in foreign markets, 
thus opening up new sources of profit; these com- 



2^6 



Combinations, 



binations have been sending their representatives 
abroad, and going to considerable expense in de- 
veloping foreign trade. The remarkable increase 
in our exportation of manufactured articles, 
from $151,102,376 in 1890 to $433,851,756 
in 1900, has been coincident with the even 
more remarkable development of the industrial 
combinations of which, as shown by the table given 
from the Twelfth Census, there were only five in 
existence prior to 1889 while there were 185 in 
1900; and even a most casual examination of the 
foregoing list of exported articles, will be sufficient 
to enable the reader to discover in them the prod- 
ucts of nearly every branch of manufacture repre- 
sented by the combinations shown in the table pre- 
sented in this chapter. 

We are forced, then, to the conclusion that it is 
the industrial combinations which have attained to 
this proud distinction, and have proved their abil- 
ity to compete with the older institutions of Eu- 
rope. 

The ability to sell in foreign markets carries 
with it, as a necessary incident, the power to sell 
for the same, or lower prices than those demanded 
by foreign producers; but our protective tariff is 
levied upon the selling value of articles in the for- 
eign market in order to enable our home producers 
So charge higher prices, and for the purpose of pro- 
jecting them in those higher prices until such time 
as they shall be able to compete with foreign manu- 
facturers. 

The question then arises, are our industrial 
combinations charging high prices to the home con- 
sumer, while they are selling at low prices in the 



Trusts and Monopolies. 257 

foreign markets? If so, it is a most grievous vio- 
lation of the spirit of the tariff law, for the purpose 
of that law is to secure benefits to the American 
citizens, and not to secure lower prices to the peo- 
ple of Europe at the expense of our home con- 
sumers ; nor merely to afford larger profits to a few 
manufacturers. 

The combinations will, however, generally deny 
that they thus discriminate in prices in favor of 
the foreign markets; and admitting their denial 
to be true, we then have this condition of affairs. 
We have positive assurance that large quantities of 
American-made articles are annually exported from 
this country which must, therefore, be sold in for- 
eign markets and at foreign prices ; and we are as- 
sured that there is no discrimination made between 
the prices charged for wares at home or abroad ; it 
follows, therefore, that these combinations are sell- 
ing their productsdn this country at the same prices 
for which similar articles are sold by foreign manu- 
facturers in foreign markets, which means that our 
home producers have ceased to avail themselves of 
the protection afforded by the tariff, and that it is 
therefore useless so far as they are concerned. 

We have, therefore, these two alternatives to 
choose from: — either our home manufacturers are 
charging high prices at home and low prices abroad, 
which is an absolute abuse of the protection af- 
forded to them by the tariff, or they are selling 
their goods in this country for the same prices at 
which foreign manufacturers are selling the same 
article in foreign markets, and therefore as cheaply 
as these foreign manufacturers could sell in this 
country if there were no tariff duties imposed, 



258 Combinations, 

which is making no use whatever of the protective 
tariff. 

In the year 1900 the Department of Labor of 
the United States prepared a list of questions for 
the purpose of determining the effects of indus- 
trial combinations upon wages, prices, etc., and the 
replies received to these inquiries have been skill- 
fully classified and analyzed by Professor Jere- 
miah W. Jenks and published in the bulletin of the 
Department of Labor No. 29, for July, 1900, en- 
titled Industrial Combinations. Twenty-nine 
combinations replied to the questions relative to 
the prices made to the export trade which are classi- 
fied by Professor Jenks as follows : "Sixteen stated 
that their export prices are the same as the prices 
within the boundaries of the United States, due 
allowance being made for transportation; three 
more said that they are approximately so, while ten 
stated that the prices differ ; eight of the ten giving 
lower prices to foreign buyers in order to secure 
their market, one reporting higher or lower prices 
to meet European competition, and pne reporting 
higher prices in foreign countries." 

Admitting the reports of these combinations to 
be true and to be representative of their classes, 
and in view of what has already been said on the 
subject, the situation which confronts us is briefly 
this: a large number of the industrial combina- 
tions are making no use whatever of the protective 
tariff, while others make only an abusive use of it ; 
the tariff has, therefore, ceased to be of any further 
legitimate service to them ; no one has ever claimed 
that a protective tariff is of any direct benefit to 



Trusts and Monopolies. 259 

the consumer as such, and since it does not benefit 
the consumer and has ceased to be of any legiti- 
mate service to these producers, the tariff, so far 
as it applies to the products of industrial com- 
binations, should be removed. 

The tariff duties should be removed from all ar- 
ticles the production of which is controlled by com- 
binations, for, as has been said, some of these com- 
binations admit that they afford lower prices to 
foreign buyers than to home consumers, which is 
a perversion of the purpose of protection; others 
claim to sell for the same prices at home and 
abroad, w r hich is equivalent to saying that they take 
no advantage of the protection afforded them by 
the tariff, w T hile the published tables of manu- 
factured articles exported from this country afford 
ample evidence of the ability of nearly all of them 
to compete with foreign manufacturers. It is con- 
trary to common justice and public policy to con- 
tinue to afford protection to combinations whose 
purpose it is to defeat every object for the promo- 
tion of which, the protective tariff was originally 
established. 

The exportation of domestic manufactures af- 
fords an indisputable test of the ability of our in- 
dustrial combinations to sell as cheaply as foreign 
producers; but in times of heavy home consump- 
tion the capacity of our factories may be taxed 
to meet the demands of domestic trade and the ex- 
ports of their products may therefore show a tem- 
porary decrease. This will, however, be simply 
due to the fact that our manufacturers have found 
a more profitable market at home, and not to any 
inability to compete for the foreign trade. The 



260 Combinations, 

annual Treasury statement of our exports, while 
it affords a very appropriate list of articles from 
which to begin removing tariff duties, cannot, 
therefore, be accepted as the only guide to be fol- 
lowed in withdrawing tariff protection from 
monopolies, for many combinations which are en- 
gaged in production may not export their products, 
yet it is desirable that protection shall be with- 
held from them, and every legitimate means should 
be employed to identify their products and to ex- 
clude them from the schedules of protected articles, 
for, as we have already shown, all of these com- 
binations are organized for the purpose of de- 
stroying competition, and of depriving the public 
of every benefit which the framers of the tariff 
laws sought to secure to it. 

There are those, however, who attempt to ex- 
plain our exports of manufactured products, and 
to excuse the practice of making lower prices to 
foreign buyers than to home consumers, by saying 
that after the demands of domestic consumption 
have been supplied, they can continue to operate 
their plants for the balance of the year at a less 
proportionate expense; and in order to give con- 
tinuous employment to their employees, they can 
afford to send this surplus product to Europe, and 
to sell it below the prevailing rates of prices in 
this country. It is something of a revelation to 
discover that these combinations are so solicitous 
to secure steady employment for their employees; 
but let us inquire a little further into this reduc- 
tion in the cost of operating their plants, which 
enables them to sell so much more cheaply to 
foreign buyers. 



Trusts and Monopolies. 261 

The best way to prove or disprove a proposition 
of this kind is to attempt its practical demonstra- 
tion by the use of figures known to represent the 
true operating expenses of manufacturing concerns 
similar to those in which the reduction in the cost 
of the production of surplus products is said to 
have been effected. Instead, however, of adopting 
a set of figures relative to the operation of some 
one particular factory, for the accuracy of which 
the reader would have to depend upon the judg- 
ment and information of the writer, we prefer to 
use the figures furnished by the Census Depart- 
ment of the United States, in volume seven of the 
Twelfth Census, relative to industrial combina- 
tions. The figures given relate to the expenses of 
all of the one hundred and eighty-five combina- 
tions reported, but they will serve our purpose 
as well, and be, perhaps, more truly representative 
of the real situation than would the figures of any 
one plant. 

In the table shown in the Census the expenses 
of the industrial combinations are classified under 
the following heads : wages, salaries, cost of ma- 
terial used and miscellaneous expenses. It re- 
quires no argument to show that the item of wages 
must continue to increase with the amount of the 
product, and that it cannot be even relatively re- 
duced whether the plant be operated for ten months 
or for twelve months in the year. Under the 
heading "salaries" are included salaried officials, 
general superintendents, managers, clerks, etc. ; and 
the total salaries paid by the combinations during 
the year 1900 amounted to $32,738,208, which 
amount is subdivided as follows: $7,152,067 was 



262 Combinations, 

paid to officers of corporations and $25,586,141 to 
general superintendents, managers, clerks, etc. 
The amount thus shown to have been paid to sal- 
aried officials of corporations may be admitted to 
be a fixed charge, which would not have been in- 
creased by the continuous operation of the plants, 
but the amount paid to general superintendents, 
managers, clerks, etc., cannot be properly so 
classed. In order to be entirely fair, however, we 
may grant that one-third of the entire force of 
superintendents, managers, clerks, etc., would have 
to be retained, even though the plant were to be 
obliged to close down during a portion of the 
year, thus making their salaries a fixed charge 
which might properly be added to the cost of 
production for home consumption. We then have, 
including the salaries of the officials of corpora- 
tions, the sum of $15,680,780 which may properly 
be classified as fixed charges. 

The materials used, like the wages paid, must 
continue to increase with the amount of the output, 
and having been already reduced to about the 
minimum cost, by their production and sale in 
quantities necessary to supply the large scale pro- 
duction of finished products for the home market, 
their relative cost cannot be much further de- 
creased, whether the plants be operated for a longer 
or a shorter time. 

Under the title miscellaneous expenses are in- 
cluded rent of works, taxes, rent of offices, insur- 
ance, interest and all sundry expenses not else- 
where included, most of which we may allow to 
be taken as fixed charges, and to be added solely 
to the cost of production for home consumption, 



Trusts and Monopolies. 263 

though it is obvious that the expense of such 
items as light, heat, wear and tear of machinery, 
etc., must continue to increase with the operation 
of the plant, and cannot fairly be classed as a 
charge which must be met whether it is operated 
or not. 

We find, then, the total possible fixed charges 
to be: miscellaneous expenses, amounting to $152,- 
157,700, and salaries of officers of corporations, 
general superintendents, managers, clerks, etc., 
amounting to $15,680,780, making a total of $167,- 
838,480. The total value of the products of these 
combinations during the census year, as shown by 
the same table was $1,667,350,949. Thus, we find 
that in the production of $1,667,350,949 worth of 
products, there were incurred fixed charges amount- 
ing to $167,838,480 which is approximately ten 
per cent, of the total value of the products. 

Suppose, then, that the preparation of this 
amount of product or the amount required for 
home consumption would only require the 
plants to be operated for ten months dur- 
ing the year, and that the fixed charges suffi- 
cient to cover the whole year's operation of the 
plants have been paid. It would then be possible 
to continue to operate the plants during the re- 
mainder of the year for the purpose of manufac- 
turing surplus products intended for the export 
trade, at a reduced expense equal to the percentage 
of the fixed charges to the entire operating ex- 
penses of the business, and the cost of the output 
so manufactured would be just that much less than 
the cost of the goods produced for home consump- 
tion. We have just seen that the fixed charges 



264 Combinations, 

constitute ten per cent, of the cost of wares in- 
tended for domestic use, and the so-called surplus 
product, or that manufactured for sale in foreign 
markets, would therefore be ten per cent, less than 
the cost of the goods produced for sale in this 
country. This is the full extent of the reduction 
in the cost that can be effected in this way. 

It may also be urged that these producers are 
willing to accept smaller profits in order to secure 
foreign trade, but the expenses of selling in foreign 
markets are much larger, the freight charges are 
higher, and the risks involved are much greater 
than they are in selling to the home trade, and if 
the profits received are still large enough to induce 
those combinations to assume these additional bur- 
dens and responsibilities, they should be sufficient 
to compensate them for engaging in the less bur- 
densome task of supplying the demands of home 
consumption. We must, therefore, conclude that 
the ten per cent, decrease which we have shown 
that it is possible to effect in the cost of produc- 
tion, is the total reduction that can be made from 
a legitimate price charged to home consumers, in 
order to enable manufacturers to sell in foreign 
markets; and, that if any greater discount than 
this is made in the price to foreign trade, it must 
be due to a decrease in the profit, and as we are 
not prepared to believe that these combinations are 
willing to go to great additional expense and incur 
much greater risks in order to secure smaller 
profits abroad than the investment of the same 
money would bring at home, their disposition to 
sell in foreign markets must be taken as an indi- 



Trusts and Monopolies. 265 

cation that they have been reaping unusually large 
profits from the American consumers. 

Since this claim of reduced cost in the produc- 
tion of products for foreign markets has been of- 
fered in defense of the claims of these combinations 
to continued protection by tariff duties, let us in- 
quire to what amount of protection they are en- 
titled upon the showing made. 

If, as is claimed, the reduction in the cost of 
production, which it is possible to effect by in- 
cluding all the fixed charges of the business in the 
cost of manufacture for domestic use, is sufficient 
to enable our industrial combinations to sell in 
competition with foreign producers in foreign mar- 
kets, and, as we have already seen, the total reduc- 
tion which it is possible to effect in that way is 
ten per cent., it follows that ten per cent, must 
represent the difference in the cost of production 
in this country and in foreign nations, for we are 
not willing to believe that foreign manufacturers 
cannot afford to sell on as small margins of profit 
as can our own producers. If, then, ten per cent. 
represents the difference in the cost of produc- 
tion at home and abroad, it is clear that the im- 
position of a duty of ten per cent, would prevent 
foreigners from underselling our manufacturers 
in our home markets, for the amount of the duty 
would in effect equalize the cost of production 
and place the producers on equality, whereas a 
duty of twelve to fifteen per cent, would suffice 
to exclude foreign manufacturers from our market 
altogether. 

The prevailing rates of tariff duties, as we have 
already shown in the beginning of this chapter, 



266 Combinations, 

average fifty per cent, of the value of the article 
upon which it is laid, which is five times the 
amount of the protection to which the products of 
our combinations would appear to be entitled under 
the most favorable showing. What, then, becomes 
of the forty per cent, of protection which is af- 
forded in excess of the ten per cent, which is 
claimed to be necessary in order to equalize the 
cost of production? If ten per cent, is sufficient 
to equalize the cost of production, which includes 
all that is paid out in wages, for material, and all 
expenses of the business, it is clear that the re- 
maining forty per cent, of the protection afforded 
must go to swell the profits of the manufacturers. 
But some will tell us that no advantage is taken 
of this additional forty per cent, of protection, and 
that prices are not raised unnecessarily high on 
account of it. Why, then, we ask, should this un- 
necessary protection be retained as a temptation to 
the less scrupulous to extort exorbitant profits 
whenever an opportunity to do so is presented? 

Whether these combinations are taking full ad- 
vantage of the opportunity which the high pro- 
tection affords them, and are charging excessively 
high prices to American consumers ; or whether, as 
many of them claim, they are selling to home con- 
sumers at the same prices for which they sell 
abroad, and are thus making no use of the pro- 
tection offered them, it is remarkable that none 
of them are ever willing to consent to a reduction 
of the tariff upon their products. A notable in- 
stance of this has recently been presented in the 
case of the anthracite coal combination. 

It had popularly been supposed that the tariff 



Trusts and Monopolies. 267 

on anthracite coal was merely nominal, and that 
it had little or no effect in enhancing the price of 
coal ; but in view of the great scarcity of fuel and 
the consequent high prices, due to the recent strike 
in the anthracite coal region, President Koosevelt, 
in his message to the second session of the Fifty- 
seventh Congress, recommended that the tariff be 
removed from anthracite coal. Measures were at 
once prepared to carry into effect the President's 
recommendation, but notwithstanding the extreme 
necessity to which the people in all parts of the 
country were reduced for want of fuel, and the 
supposed indifference of the anthracite coal com- 
bination, a determined opposition at once developed 
to the repeal of the duty, and it became evident 
that a compromise was all that could be hoped for. 
A bill was then passed repealing the duty on an- 
thracite coal for the period of one year. 

With this record before us of successful partici- 
pation by our home manufacturers in the 
trade of foreign markets, and in view of 
the small difference which it is possible to make 
in the cost of production, even by throwing the 
whole burden of the fixed charges upon the home 
consumer, we are forced to believe that our indus- 
trial combinations can produce as cheaply as any 
other manufacturers in the world ; but the rapidity 
with which these combinations are increasing in 
numbers and in power, leads us to believe that 
they are reaping much larger profits than could be 
derived from the sale of their entire product at the 
same prices for which they are obliged to sell that 
portion of it which they send abroad, and the des- 
perate determination with which they resist every 



268 Combinations, 

attempt to lower the tariff duties upon their prod- 
ucts, as has recently been illustrated by the action 
of the beet-sugar interests and by the anthracite 
coal combination, confirms the belief that the pro- 
tection afforded by the tariff is being used for the 
purpose of protecting them in charging high prices 
at home, while they are able to sell for much lower 
prices abroad. It would seem, therefore, to be 
the plain and imperative duty of, the National 
Government to remove the tariff duties from all 
articles which are produced or controlled by com- 
binations, trusts or monopolies of whatever kind, 
and thus to diminish their power to levy tribute 
upon the American people for the sole purpose of 
swelling their private treasuries. 

But we are told that by removing the duties 
from articles the production of which is controlled 
by combinations, we would not only cripple the 
combinations, but would also destroj 7 - the business 
of the individual manufacturers who are engaged 
in the production of the same articles. Let us see 
if this is true. 

The purpose of the protection afforded by the 
tariff is to enable home manufacturers to demand 
high prices for their products, and to prevent them 
from being undersold by foreign producers. One 
of the purposes of our industrial combinations is 
to acquire the ability to produce as cheaply as 
foreign manufacturers and to sell their products 
in the foreign markets, and the published statis- 
tics of the exports of our domestic manufactures 
appear to furnish conclusive proof that many of 
them have succeeded in accomplishing their pur- 
pose. We have, then, individual manufacturers 



Trusts and Monopolies. 269 

who are protected from foreign competition by 
high protective duties, and, side by side with them, 
combinations which are active competitors of those 
same foreign producers from whose competition 
our manufacturers are protected. If our domes- 
tic combinations can compete with foreign manu- 
facturers abroad, they must be even better able to 
compete with them at home in our own country, 
where the extra burden of ocean transportation 
must be borne by the foreigner and be saved by 
the domestic producers, and since the tariff does 
not protect our individual manufacturers against 
homemade products of combinations or trusts, what 
is there to protect them from this competition 
which is capable of being even more severe than 
that of the foreigner from whom they have already 
sought and secured protection ? Are we to suppose 
that the combinations will prove to be less active 
competitors of our individual manufacturers than 
the foreigners would be? Experience has already 
shown that they can, and will, undersell the in- 
dividual producer whenever and wherever it be- 
comes necessary, in order to enable them to secure 
control of the market, and the power of most of 
these combinations is built upon the ruins of the 
once prosperous business of individual producers. 
Are we to be expected to believe that the combina- 
tions and monopolies will be more merciful to their 
individual competitors than they are to the con- 
sumers of their products? No; we must recog- 
nize the fact that the tariff affords no real protec- 
tion to the individual manufacturer, wherever he 
is opposed by a combination of sufficient size to 
control the market. 



270 Combinations, 

Our individual manufacturers may be able to 
produce as cheaply as the manufacturers of Europe, 
but we are not discussing that point. We have 
every reason, however, to believe that our indus- 
trial combinations certainly are able to produce 
as cheaply, and that they may at will depress 
prices to the level of the foreign market, or raise 
them to the highest level to which the tariff af- 
fords protection. Thus the tariff is made to serve 
the purpose of the combinations, and if the indi- 
vidual manufacturers derive any benefit from it, 
it is merely during the will and pleasure of the 
combinations to allow them to do so. Instances 
have already been shown of the power of monopo- 
lies to destroy competition by the arbitrary rais- 
ing and lowering of prices in this way, and it makes 
no difference whether the articles produced or dealt 
in are protected by tariff duties or not, save that 
the tariff excludes foreign competition altogether, 
and to that extent facilitates the control of the 
home market or domestic combinations or monop- 
olies. 

We are also frequently reminded that combina- 
tions and monopolies have been formed in the pro- 
duction of articles upon which there are no tariff 
duties imposed, and this is advanced as an evidence 
of the fact that combinations can exist independ- 
ently of tariff protection. In reply to this we 
would say that the fact that one or more combina- 
tions exists independently of tariff protection, does 
not in any way tend to prove that others may not 
be largely, or even entirely, dependent upon it. 

We wish to repeat that we have not attempted to 
prove that combinations are dependent upon the 



Trusts and Monopolies. 2711 

tariff, but rather that they are independent of it. 
It affords to them a protection which is no longer 
necessary to enable them to pursue their legiti- 
mate business, and which they now use merely as a 
means of extorting high prices from the American 
consumers, while they are at the same time dis- 
playing their ability to compete with those foreign 
manufacturers against whose products they are 
receiving protection. 

We admit, and have shown by the table of com- 
binations herein published, that there are com- 
binations and monopolies which receive no pro- 
tection from the tariff, and, for the purpose of this 
discussion, we are willing to admit that there may 
be industries and individual manufacturers which 
are deserving of, and entitled to receive tariff pro- 
tection ; but the same table also shows that a great 
majority of the combinations which have been 
formed are engaged in the production of tariff 
protected articles, and the record of the exporta- 
tion of domestic manufactures from this country, 
appears to show further that a large majority of 
these combinations are able to sell their products 
abroad in competition with the products of foreign 
manufacturers, and that they are therefore able 
to compete with these foreign manufacturers in 
our home market and require no tariff protection. 

We therefore contend, that whenever a sufficient 
number of producers to represent fifty per cent, or 
more of the output of any one industry combine 
together, — they forfeit all further right to tariff 
protection. They then take the matter of protec- 
tion into their own hands; they have the indi- 
vidual producers completely at their mercy and can 



272 Combinations, 

deprive them of the benefits of tariff protection at 
will; and since the individual producers cannot 
be protected against the competition of the combi- 
nations^ the power of the combinations to levy ex- 
cessive charges upon the people under the shelter 
of tariff protection, should be destroyed by remov- 
ing the tariff duties altogether from all articles, 
the production of which is controlled by combina- 
tions, trusts, or monopolies of any kind. 



Trusts and Monopolies. 273 



CHAPTER X. 

REMEDIES. 

The first and most fundamental purpose of 
every government is the protection of the life, lib- 
erty and property of its citizens. 

When man first ceased to roam the world in 
savage freedom, and became a member of organ- 
ized society, he surrendered the right to wage war 
upon his neighbor, and yielded to society the right 
to make laws for the control of his intercourse 
with his fellow-man. In return for this, he re- 
ceived the assurance that the government would, 
by its duly appointed officers, afford him protection 
to life, liberty and property, and make laws which 
would secure to him the greatest possible amount of 
freedom consistent with the rights of every other 
member of the community: and his descendants 
have inherited his rights under this unwritten con- 
tract. 

Mutual concession is the foundation of all so- 
ciety. The power of the wealthy depends upon the 
strength of society, and its ability to afford them 
protection. Let the stability of a government be 
shaken, and a financial panic will immediately; 
ensue, and the confidence of the wealthy disappear* 
The strength of society depends upon the readi- 
ness of the people to support it, to obey its laws^ 



274 Combinations, 

and to respond to the demands of its officers; to 
support it with their money by paying taxes, and 
with their lives in the enforcement of its laws, or 
in waging war in defense of its rights when neces- 
sary. Can any one doubt, then, that the first and 
highest function of every government is the pro^ 
tection of the rights of the whole people, whose 
mutual sacrifice brought it into being, and whose 
constant support is necessary to its preservation? 
There would be no difference in principle 
whether a foreign prince were to come with force 
of arms to our shores to take possession of our land, 
and then to exact tribute from the people for the 
privilege of living upon it, or whether a syndicate 
of our own citizens were to secure title to the same 
lands by purchase, and then to proceed to exact 
an exorbitant rental for the use of it; or, again, 
whether the foreign conqueror were to assume the 
absolute control of the production of some one of 
the necessaries of life, and then to raise its price 
to an unreasonable figure, or suspend its produc- 
tion altogether, at pleasure; or whether our do- 
mestic sjmclicate were to acquire control of the same 
commodity by purchasing the source of production, 
and then, by exercising the power of monopoly, to 
proceed to oppress the people as mercilessly as any 
foreign conqueror might do. In either case, it 
would be the plain and imperative duty of the 
government to relieve the people from the unjust 
oppression to which they were being subjected. 
The remedy might not be the same in both cases, 
and the people might be a little more tolerant and 
slower to demand the restoration of their rights 
in one case than in the other ; but relief must come 



Trusts and Monopolies. 275 

in either case, and come before it is too late, or 
revolution, if not anarchy will be certain to result. 

This right of every individual to protection, and 
the corresponding obligation on the part of the 
government to afford it, may seem to be more clearly 
recognized by some forms of government than by 
others ; but they are equally binding upon all, and 
it is merely a matter of time and development until 
they shall become generally recognized as the most 
important considerations for the preservation and 
development of which all governments are formed. 
Blackstone, speaking of this subject in' his "Com- 
mentaries on the Laws of England/' says: "And 
this is what we mean by the original contract of 
society; which, though perhaps in no instance it 
has ever been formally expressed at the first in- 
stitution of a state, yet in nature and reason must 
always be understood and implied, in the very act 
of associating together; namely, that the whole 
should protect all its parts and that every part 
should pay obedience to the will of the whole ; or, 
in other words, that the community should guard 
the rights of each individual member, and that (in 
return for this protection) each individual mem- 
ber should submit to the laws of the community; 
without which submission of all it was impossible 
that protection could be certainly extended to any/' 

Numerous revolutions, from the time of the 
Magna Charta down to the American Kevolution, 
have served to fix this principle most clearly in 
the common law of England and the Constitution 
of the United States, and those of the several 
states recognize it as a part of the fundamental 
law of this country. 



276 Combinations, 

Constitutions are always written to provide for 
the conditions which obtain at the time of their 
adoption, and to anticipate so far as practicable 
those which are likely to arise in the future; but 
time and progress are always certain to bring 
about situations which seem to be beyond the 
limits of the constitutional provisions, and with 
which the people therefore seem powerless to deal. 
We should bear in mind, however, that constitu- 
tions are made for the benefit of the people, and 
that whatever right there is inherent in the people, 
will always prevail in the end, even though consti- 
tutions may have to be changed or set aside in order 
to accomplish it. 

The calamities attending the American civil 
war of 1861, were in a large measure due to a fail- 
ure to recognize this absolute right of the people 
to control, in spite of constitutional or other artifi- 
cial limitations. The Constitution of the United 
States recognized the right of the people of the 
South to hold slaves, and they felt perfectly se- 
cure in their right, believing that no power could 
deprive them of it. But they went too far in their 
confidence; they afforded the opportunity, and the 
North took advantage of it, destroyed the insti- 
tution of slavery, as a war measure, and amended 
the Constitution afterwards. 

Another instance of the arrogance of power and 
vested rights, has just been afforded in the case of 
the anthracite coal strike which prevailed through- 
out the summer and part of the fall of 1902. The 
miners refused to work under existing conditions, 
and the operators could not get a sufficient number 
of men to operate the mines. The supply of coal 



Trusts and Monopolies. 277 

was rapidly becoming exhausted throughout the 
country; its price rose to double that ordinarily 
demanded, and in many places hard coal could not 
be had at any figure. Winter was at hand, and 
great suffering for want of fuel was threatening the 
people; yet the coal operators persistently refused 
to submit the matters in dispute to arbitration, or 
to make any settlement whatever with their 
former employees, short of an absolute sur- 
render of their claims. The President of 
the United States, several United States Sena- 
tors, and the Governors of the two largest 
states in the Union, pleaded with them for weeks 
in vain, the operators, all the while, declaring their 
determination to stand upon their absolute 
rights, under existing laws, to use their pri- 
vate property as they saw fit; but they were 
finally prevailed upon to submit the matter to arbi- 
tration before any more serious consequences re- 
sulted. 

It is impossible to tell what might have been the 
result of a continuation of the policy adopted and 
maintained by the coal operators for so many 
months. It is certain, however, that they would not 
long have been allowed to keep the coal locked up 
in the earth, while the people were suffering from 
cold and disease in consequence of the want of fuel. 
The common people are patient and slow to resent 
an injury; they may endure much suffering and 
many wrongs for a time, but they will at last be 
moved to anger, and when they do rise in their 
might and take the law into their own hands, no 
mere conventional forms or regard for vested rights 
can restrain them. The means which they employ 



278 Combinations, 

may not always be the wisest or the best, but they 
are usually sweeping and thorough, and are always 
most disastrous for those who have excited their 
wrath. 

We believe that we have now made this principle 
sufficiently clear, namely, that the chief purpose of 
government is to protect the rights of every citizen, 
and that the power of redress against every wrong, 
always resides in the people. We believe that a 
more general recognition of this fact by monopo- 
lists will afford the first, and a most effective pro- 
tection against the abuse of monopolistic power. 

Corporations, combinations, trusts, and all those 
who control large aggregations of capital should 
remember that their security and their power rest 
solely upon the will and pleasure of the common 
people. They should bear in mind that all supreme 
power resides in the people, and that the powers of 
government are merely delegated powers; that 
constitutions are merely obstructions to the free 
manifestations of the popular will, agreed to for 
the sake of convenience and expediency, but which 
may be swept aside at any time by the powers 
which made them. 

"Power in the people is like the sun, native, 
original, inherent, and unlimited by anything hu- 
man. In government it may be compared to the 
reflected light of the moon, for it is only borrowed, 
delegated and limited by the intention of the peo- 
ple, whose it is, and to whom governors are to con- 
sider themselves as responsible, while the people 
are responsible only to God; themselves being the 
losers, if they pursue a false scheme of politics." 



Trusts and Monopolies. 279 

(Burgh's "Political Disquisitions," Vol. I., Bk. 1, 
Ch. 2.) 

Our republican form of government affords to 
the people a temperate and peaceable means of ex- 
pressing their will through the instrumentality of 
the ballot, and they are naturally disposed to abide 
by the restrictions which they have thrown about 
themselves; but if combinations of capital, 
by changing from one form of organization to 
another, or by removing from the jurisdiction 
of one state into that of another, continue to 
seek refuge behind some provision of constitutional 
or statutory law, from which position of fancied se- 
curity they hope to be able to prey upon the rights 
and necessities of the people, they will find that 
these protections are worth but little more than 
the ink it took to write them, whenever the people 
resolve that they shall be removed. 

But if, on the other hand, these combinations will 
recognize the fact, that the rights of the public 
must be respected no matter what it may cost to 
secure it, if they will be satisfied with reasonable 
profit, and will be content to allow to the public a 
fair share of the benefits of their improved facili- 
ties for production, they will find the people ready 
to allow them all the facilities and powers neces- 
sary to conduct their business in the manner and on 
such a scale as the requirements of the age may 
demand. It is the fear of monopolies and of the 
abuse of the powers of corporations which has led 
to this continual warfare upon the growth of cor- 
porate powers, and not any disposition to deprive 
capital of its legitimate profits in business. 

The great aggregations of capital which menace 



280 Combinations, 

the public interests, and with which we are con- 
cerned in this chapter, have nearly all now assumed 
the form of corporations. Those which still retain 
the trust form, or other forms of agreement, may 
generally be reached by the anti-trust statutes of 
the several states, or by the common law, and the 
large amounts of capital owned by single individ- 
uals are in most instances invested in the stocks of 
corporations; so it is chiefly of corporations that 
we shall now speak. 

Believing, then, that good faith both on the part 
of corporations and on that of the public, a mutual 
recognition of each other's rights, and confidence 
in each other's fidelity, will prove to be the most 
effective, the most natural, and the most enduring 
remedy that can be applied to the present strife 
between the corporations and the people, let us in- 
quire in what way can these be best secured. 

Good faith and fair dealing, or honesty and fair- 
ness of purpose, cannot be created by legislation. 
iWe may impose penalties for the gross violation of 
them, but these can only hope to reach their most 
conspicuous offenses which, like the great deeds 
of individuals, form but a small portion of their 
life's work. So long as the disposition is evil and 
the opportunity is afforded, there will always be 
quibbling and evasion. Honesty, to be effective, 
must come from within. Dishonesty in corpora- 
tions, like dishonesty in individuals, does, however, 
in a measure bring about its own punishment ; for 
unfairness on one side is certain to induce antago- 
nism and a corresponding unfairness on the other, 
which usually results in a loss to both parties. It 



Trusts and Monopolies. 281; 

is this deadlock of mutual mistrust that we wish to 
dissipate. 

We can, however, encourage the growth of these 
virtues in corporations by diminishing the oppor- 
tunities of doing evil, by letting in the sunlight 
upon the dark and hidden by-ways, and thus ex- 
posing their every act to public view. There is 
nothing that helps to encourage the growth of hon- 
esty so much as the full light of day. 

Confidence, on the other hand, can be directly 
fostered and promoted by legislation. A full 
knowledge of all the facts and circumstances, is the 
only true basis of confidence in human affairs, 
and by affording this knowledge to the public, the 
growth of honesty and fair dealing will also be 
encouraged, both of which must be found to exist, 
or the knowledge gained will tend to destroy rather 
than to inspire confidence; but in order to obtain 
this necessary knowledge, there must be public 
supervision of some kind. Corporations are cre- 
ated by the legislative power of the people, exer- 
cised by their representatives in general assembly; 
they receive their power from the people ; they re- 
ceive their immunities and privileges from the 
public; their operations directly affect the inter- 
ests of the public, and it is clearly necessary, there- 
fore, that it should possess complete knowledge of 
the affairs of corporations in order to be able to 
understand what should justly be granted and what 
withheld. By whom shall this supervision be ex- 
ercised is what we shall now inquire. 

The importance of the subject considered as to 
its effect upon the welfare of the people ; the extent 
and variety of the combinations and corporations 



282 Combinations, 

to be affected, operating as they do in every state 
and territory in the Union ; and the apparent con- 
flict between the purposes of the legislative provis- 
ions of the several states in relation to combinations 
and corporations would seem to stamp it as a sub- 
ject requiring national regulation and control. The 
Government of the United States, however, is a 
government having merely certain enumerated pow- 
ers. It does not possess all the usual inherent rights 
and powers of sovereignty, and is limited to the ex- 
ercise of those powers which have been delegated to 
it by the states. In order, therefore, to enable Con- 
gress to assume control over this subject, it must 
be brought fairly within the scope of the enumer- 
ated powers granted to Congress by the Constitu- 
tion of the United States. 

The only industry over which Congress is given 
any express power of control is commerce with 
foreign nations, and among the several states and 
with the Indian tribes; but the combinations and 
corporations with which we have chiefly to do in 
this chapter are, for the most part, engaged in 
manufacture, mining, and kindred industries, the 
greater part of which are conducted wholly within 
the jurisdiction of some one state or states, and 
merely employ interstate commerce as a means of 
transporting their products. These corporations, 
then, do not fall within the powers conferred upon 
Congress unless the transportation of their products 
in commerce among the states, gives Congress the 
right to assume control over them. In the case of 
the United States versus the E. C. Knight Com- 
pany, 156 United States Keport, P. 1, the Supreme 
Court of the United States held that a company en- 



Trusts and Monopolies. 283 

gaged in the business of manufacturing, within 
the bounds of any state, even though it might em- 
ploy interstate commerce in the transportation of 
its products, was, nevertheless, subject solely to the 
jurisdiction of the state; that Congress had no 
power to interfere with the affairs of the company 
so long as it did not attempt to regulate interstate 
commerce; and that the shipment of its products 
was merely an incident to its principal business of 
manufacture, and did not constitute such an inter- 
ference with commerce among the states as would 
bring the case within the jurisdiction of Congress. 
The Supreme Court has also repeatedly declared 
that the power of Congress to regulate commerce 
does not imply the power to regulate the incidents 
of commerce. 

We are therefore obliged to conclude that Con- 
gress has not the power to assume the general 
supervision and control of these combinations and 
corporations. , 

Many writers and statesmen have urged the 
necessity of amending the Constitution of the 
United States so as to enable Congress to assume 
supervision and control over all combinations, 
trusts, corporations, or other aggregations of capi- 
tal which may possess, or seek to create monopolies 
of any kind; but no definite form of amendment 
to the Constitution, by which to confer these 
powers upon Congress, has yet been agreed upon 
by the friends of this method of procedure. 

An amendment to the Constitution of the United 
States for the purpose of granting these powers 
to Congress, was proposed in the House of Kepre- 
sentatives during the first session of the fifty- 



284 Combinations, 

sixth Congress, in March, 1900, by George W. Ray, 
of the State of New York, the provisions of which 
were as follows: 

"Sec. 1. All powers conferred by this article 
shall extend to the several states, the territories, 
the District of Columbia and all territory under 
the sovereignty and subject to the jurisdiction of 
the United States. 

"Sec. 2. Congress shall have power to define, 
regulate and control, prohibit or dissolve trusts, 
monopolies or combinations whether existing in 
the form of a corporation, or otherwise. The several 
states may continue to exercise such power in any 
matter not in conflict with the laws of the United 
States. 

"Sec. 3. Congress shall have power to enforce 
the provisions of this article by appropriate legisla- 
tion." 

This amendment was referred to a committee by 
which it was favorably reported, and on June 1, 
1900, it received the vote of the majority of the 
members present and voting in the house, 154 mem- 
bers voting for it, but failed of the two-thirds vote 
necessary for its adoption. 

As may be seen at a glance, this amendment 
would give to Congress almost unlimited power over 
all combinations, corporations, etc., which tend 
in any way to create monopoly. As Con- 
gress would have the sole right to judge 
of the existence of the tendency to monopoly, 
and since it could not be in a position to 
properly judge of the existence of the tendency 
unless it were familiar with the internal af- 
fairs of corporations, it follows that Congress might 



Trusts and Monopolies. 285 

soon acquire exclusive jurisdiction over nearly 
the entire business of the country; but the far- 
Teaching effects of the exercise of such powers by 
Congress, and its destructive influence upon the 
right of self-government, which was originally 
possessed by the several states and afterwards 
reserved to them by the Constitution of the United 
States, have been so forcibly set forth by the Su- 
preme Court in relation to the extension of the 
power of Congress to regulate commerce among the 
states, as shown by the extracts from the opinion 
of Chief Justice Fuller presented in a preceding 
chapter, — that it is unnecessary to say anything 
further upon that point, except to remark that the 
tendency toward monopoly is almost as prevalent 
among business corporations as is their use of inter- 
state commerce, and that it is therefore apparent 
"that the same reasoning will apply with equal 
force to this class of cases. 

It is true that in the case of the United States 
versus The E. C. Knight Company, the Court re- 
ferred directly to the extension of the powers of 
Congress by construction, whereas in the case in 
question, it is proposed to extend them by amend- 
ing the Constitution, and that, in so far as the 
power to act is concerned, the cases are entirely 
different; but the Court, in rendering its decision, 
went further than merely to determine the ques- 
tion of its power to extend the jurisdiction of Con- 
gress, and announced the principles upon which! 
the power to regulate commerce was granted to 
Congress, and the reasons which led to the reserva- 
tion to the several states of the power to regulate 
domestic commerce, manufacture and the like, and 



286 Combinations, 

which require it to be still retained by them. So 
far as the principle and reasons which led to this 
distribution of powers are concerned, the cases are 
precisely alike. 

The power of the people to amend the Constitu- 
tion of the United States so as to grant to, or with- 
hold from, Congress, or from the several states, 
whatever powers they may desire to extend or with- 
hold, cannot be denied ; but the wisdom of exercis- 
ing that power too freely may be very seriously 
questioned and it would seem that the same rea- 
sons which led the Supreme Court of the United 
States, in the Knight case, to refuse to even enter- 
tain the thought of allowing Congress to invade 
the fundamental right of the states to self-govern- 
ment in local affairs, even though a temporary 
benefit might be obtained thereby, should be suffi- 
cient to induce the people to refuse to grant these 
same powers in any other way. 

Mr. William J. Bryan has proposed the following 
remedy for regulation of trusts : "Every corpora- 
tion doing business outside of the state of its cre- 
ation shall obtain a license from the national gov- 
ernment which shall, first, prevent watering of 
stock; second, prevent monopoly; third, require 
publicity as to all its transactions, else that license 
shall be revoked/' 

The adoption of these provisions would also re- 
quire an amendment to the Constitution of the 
United States, which would be subject to the same 
objection as the one which we have just considered. 
Nearly all corporations of any considerable size do 
more or less business outside of the state of their 
creation, and would, therefore, fall within the 



Trusts and Monopolies. 287 

provision of such an extension of the powers of Con- 
gress; and the power to prevent monopoly is es- 
sentially the same, and would be quite as far- 
reaching in its effects as the powers proposed by the 
Bay amendment. 

The magnitude of the interests which are thus 
sought to be taken from the jurisdiction of the states 
and placed under the immediate control of Con- 
gress, will perhaps be more fully appreciated when 
it is remembered that fifty-nine and five-tenths per 
cent, of the total amount of products manufactured 
in this country during the year 1900, as shown 
by the Twelfth Census, was produced by corpora- 
tions. 

In attempting to give Congress control of these 
corporations which seek to become monopolists, it is 
exceedingly difficult to tell where to draw the line 
between the good and the bad, and this is the bul- 
wark of the modern combinations. They have as- 
sumed the same form of organization as that of the 
smallest business corporation, and it is almost im- 
possible to make laws which will apply to one and 
not to all. If the capital stock were to be adopted 
as the means of classification, it would be very dif- 
ficult to say whether the line of distinction should 
be drawn at one hundred thousand, at one million, 
at ten millions, or at one hundred million dollars, 
and it would seem to be equally difficult to classify 
them no matter what standard of comparison may 
be adopted for the purpose. 

The extreme difficulty of framing an amendment 
to the Constitution of the United States, for the 
purpose of granting these powers to Congress, arises 
from the necessity of defining a power which will 



288 Combinations 



be sufficiently comprehensive to enable Congress to 
reach the evils sought to be remedied, but yet, 
not so broad as to admit of any extension of the 
power beyond the purpose sought to be accom- 
plished, or to any unnecessary invasion of the sover- 
eign rights of the states. Judging from the zealous 
care with which the original thirteen states guarded 
their reserved powers at the time of the making of 
the Constitution of the United States, and from 
the strong love of local self-government which so 
generally animates the people of the numerous 
states which have become members of the Union 
since that time, as well as from the very con- 
flicting views entertained by the people of the vari- 
ous states as to the manner in which these corpora- 
tions would be dealt with; and in view of the sig- 
nificant fact that of the fifteen amendments which 
have been made to the Constitution of the United 
States since the time of its adoption, not one has 
conferred any additional powers upon Congress, 
and of the further fact that, with the exception of 
the last three amendments which were adopted dur- 
ing the pressure of the circumstances arising out 
of the civil war, it lacks but a little more than one 
of being a hundred years since the last . amend- 
ment of any kind was made to the Constitution: 
it seems improbable that any amendment to the 
Constitution of the United States making any ex- 
tensive grants of power to Congress in this direc- 
tion, will be ratified by the legislatures of three- 
fourths of the states within the very near future. 
Nearly all of the corporations which are doing 
business in this country, with the exception of those 
which serve in some way to discharge a particular 



Trusts and Monopolies. 289 

function of the national government, as the national 
banks, etc., and a few foreign corporations organ- 
ized in Great Britain and elsewhere, are created 
by the legislatures of the several states. They are 
subject to the jurisdiction of the state which cre- 
ated them and are amenable to its laws ; they have 
no legal existence beyond its limits, and that state 
has almost absolute power to control and regulate 
their affairs. 

It appears, therefore, that the state is the proper 
authority to exercise this power of supervision and 
inspection over the affairs of corporations in order 
to obtain the information which we are seeking to 
secure. Chief Justice Fuller, speaking on this 
point for the Supreme Court of the United States 
in the E. C. Knight Company case, says: "It 
cannot be denied that the power of a state to pro- 
tect the lives, health and property of its citizens, 
and to preserve good order and the public morals, 
'the power to govern men and things within the 
limits of its dominion/ is a power originally and 
always belonging to the states, not surrendered by 
them to the general government, nor directly re- 
strained by the Constitution of the United States 
and essentially exclusive. The relief of the citi- 
zens of each state from the burden of monopoly and 
the evils resulting from the restraint of trade among 
such citizens, was left with the states to deal with 
and this court has recognized their possession of 
that power even to the extent of holding that an 
employment of business carried on by private in- 
dividuals, when it becomes a matter of such public 
interest and importance as to create a common 
charge or burden upon the citizen ; in other word-, 



290 Combinations, 

when it becomes a practical monopoly, to which the 
citizen is compelled to resort and by means of 
which a tribute can be exacted from the commu- 
nity, is subject to regulation by state legislative 
power." 

It should be borne in mind that the purpose 
of the public supervision which it is proposed 
to establish over the affairs of corporations, is to 
secure the necessary information to enable the 
state to deal intelligently with them. The affairs 
of the public are open to the inspection of every 
one ; the motive and end of every act of the legis- 
lature are more fully understood by the officials 
of corporations than they are by the majority of 
business men, while the public knows practically 
nothing of the affairs of corporations save what 
their officials choose to disclose. 

The creation of a corporation is merely a busi- 
ness transaction between incorporators on the one 
side, and the public on the other. A set of incor- 
porators apply to the state legislature for the priv- 
ilege of carrying on a given business in the name 
of an association, to be relieved from individual 
liability for the debts and responsibilities incurred 
in the business ; to be allowed to sue in the courts ; 
and to receive the full protection and benefit of the 
laws of the state to the same extent as natural 
persons; to be empowered to hold real and per- 
sonal property, and to dispose of the same at will; 
and to be allowed to issue stocks, bonds and other 
securities, in forms which are popularly supposed 
to be safeguarded by legislative provisions, and 
which therefore sell readily among the people. A 



Trusts aPxd Monopolies. 291 

charter is granted conferring those powers, and the 
association is said to be incorporated. 

In return for this grant of powers, the corpora- 
tion is presumed to render some service to the pub- 
lic by way of compensation, else why were these 
extraordinary privileges granted ? This service 
may be rendered in the form of a direct accommo- 
dation to the public, as in the case of railroads 
and the like : or it may be in conducting manufac- 
ture or trade on a large scale, which may be ex- 
pected to result in better goods, or lower prices 
to the people; but in whatever way the service 
may be rendered, the acknowledgment that it is 
due, implies the right of the community to take 
the necessary precautions to see that it is receiv- 
ing the full amount to which it is entitled. 

Again, all the powers that are granted to corpo- 
rations are granted under the presumption that 
they will be exercised subject to certain safeguards 
and restrictions, and if there is no means pro- 
vided by which the state may at all times know 
whether these requirements are being complied 
with or not, the legislature has failed to discharge 
the trust imposed in it, and the state, therefore, 
cannot perform its full duty to the people. 

Under the present system, after a corporation 
has been doing business for a time, it returns to 
the legislature and asks for an extension of its 
powers; but the legislature has known practically 
nothing of the company since the date of its in- 
corporation and can learn nothing now except such 
matters as its officials are willing to disclose. The 
public and the members of the legislature know 
well that the corporation is actuated by selfish mo- 



292 Combinations, 

tives, and that its statement of its case cannot, 
therefore, be accepted as an impartial statement 
of facts upon which legislative action may be 
founded. The legislature, therefore, finds itself 
obliged to act in the dark, not knowing the real 
conditions, and feeling satisfied that if it grants 
wdiat the corporation asks, it will be allowing too 
much, it usually prefers to take no action, even 
though it may be convinced that some concession 
of power might be beneficial both to the corpora- 
tion and to the public. 

The result of this mutual mistrust is a continual 
contest between the corporations and the people, 
which engages the attention of nearly every legis- 
lative assembly in the country. So it would seem 
to be clear that fair and upright, frank and open 
dealing would, in the end, prove to be most profita- 
ble for both sides. 

We have spoken of individual corporations as 
applying directly to the legislature for their corpor- 
ate powers, for this is in effect what they still do, 
and what they all had to do in fact, originally ; and 
the taking of an individual company serves better 
to illustrate the principle, and more directly ex- 
presses the relations of the parties. The general 
incorporation laws which have been enacted in 
most of the states, are merely a means of facilita- 
ting the granting of charters, and do not alter the 
situation in the least; the principle is the same 
whether a charter be granted directly to an indi- 
vidual corporations, or to a number of them which 
tall within a prescribed class. The extension of 
their powers is also now made by amendments to 
the general corporation laws, and the endeavor to 



Trusts and Monopolies. 293 

so frame these amendments as to meet the de- 
mands of the various kinds of corporations em- 
braced within a given class, makes this task a 
most difficult undertaking. 

Let us now examine some of the objections which 
are likely to be urged against the establishment of 
public supervision of corporations. It is said in 
the first place that their business is of a private 
character and that the public has, therefore, no 
right to interfere with it ; but, as we have already 
seen, these corporations have not only been created 
by the public, but have also been granted special 
powers and privileges, and justice demands that 
wherever a grant is made, whether it be by an in- 
dividual or by a state, there shall be some com- 
pensation made in return. These corporations da 
not make any specific payment in return for the 
corporate powers which they receive, and since the 
state cannot be presumed to give away valuable 
privileges merely as a matter of charity, it follows 
that the compensation must be paid in the form of 
improved service of some kind, and it devolves upon 
the state to exact its full share of such service 
from them. The state has relieved their stock- 
holders from individual liability for their corpor- 
ate debts, and it should therefore see that their 
creditors are protected; it has authorized them to 
issue bonds and other securities and it owes it as a 
duty to the purchasing public to see that these se- 
curities are issued only under proper safeguards 
and against sufficient assets ; and how can the state 
perform those duties without an intimate knowl- 
edge of the affairs of these corporations ? 

Many small companies are organized merely for 



294 Combinations, 

the purpose of enabling some irresponsible indi- 
vidual to carry on business under the name of a 
corporation with a view of securing greater credit 
thereby. The wives and sisters of these persons 
join with them for the purpose of obtaining a 
charter, but the business continues to be con- 
ducted as the private property of the individual 
proprietor and the corporation exists merely in 
name. This class of corporations would object to 
publicity, but an exposure of their affairs would 
be greatly to the benefit of their creditors, and of 
the public at large. 

Another class of corporations object to publicity 
hecause they fear the exposure of the discrimina- 
tion of prices which they make to customers, and 
discriminating rates which they receive from 
others, and often, also, because of secret agree- 
ments as to prices, etc., which exist between con- 
cerns engaged in the same business ; but these are 
all acknowledged evils which it is to the interest 
of the public to eradicate. The national govern- 
ment has established a commission known as the 
Interstate Commerce Commission for the express 
purpose of preventing similar abuses among rail- 
road companies, and why should not the public be 
protected from being wronged in the same way by 
manufacturing and other corporations? 

Nearly all large corporations also place their 
stock on the market for sale, and invite the people 
to invest their money in it. Whatever the public 
is asked to purchase, it has a perfect right to ex- 
amine, and to inquire into every particular which 
enters into its value. The operations of the com- 
pany and the properties held by it, are the elements 



Trusts and Monopolies. 295 

which give value to the stock, and the public, there- 
fore, has a perfect right to inspect them. 

These stocks and bonds of industrial corpora- 
tions have already become a most important source 
of investment. They are rapidly invading the po- 
sition once held by real estate as the only recog- 
nized safe investment for men of small means, and 
prudence and the welfare of the nation demand 
that the greatest care and protection should be 
thrown about them. The convenient form of these 
securities and the ease with which they may be 
transferred in large or small amounts, make them 
most desirable and tempting forms of investment, 
and many fortunes have already been lost by per- 
sons who have yielded to the temptation to pur- 
chase without having the means of securing ade- 
quate information as to the real value of the prop- 
erties which the paper purported to represent. 

What business man would think of loaning five 
or ten thousand dollars upon a piece of real estate 
without first having an attorney examine as to every 
detail of the title, and then inquiring particularly 
as to the amount of rent or other revenue de- 
rived from it, the taxes to be paid, the insurance 
carried, the repairs needed, etc., and why should 
a man be required to invest the same amount of 
money in the stock of some industrial corporation 
with no better assurance as to its value than the 
mere statement of some stranger who may chance 
to have it for sale? 

Most of these large corporations invite public 
investigation of their affairs by publishing annual 
statements of their receipts and expenditures, 
their assets and liabilities, and the dividends paid 



296 Combinations, 

upon their stock; for the purpose of inducing the 
public to purchase their securities. These state- 
ments are given out to the public as true and accu- 
rate accounts of their affairs; yet these same 
corporations are most careful and most determined 
in their efforts to exclude the public from access 
to their books. A familiar instance of the extent 
to which these companies are willing to go in order 
to prevent public inspection of their affairs is that 
of the Standard Oil Trust which, when commanded 
to bring its books into court, burned a large num- 
ber of them in order to prevent their inspection, 
thus wilfully disregarding the orders of the court, 
and risking the imprisonment of its officers rather 
than expose accounts which it claimed to be unim- 
portant. 

If these published statements are true, if all of 
the properties of the corporations are thus fully 
shown, the receipts and expenditures of the busi- 
ness thus fully exposed, and the profits earned so 
frankly disclosed; what reasonable objection can 
there be made to a public inspection of the opera- 
tions by which these results have been obtained? 

If, however, these statements are merely the re- 
sult of a peculiar system of corporation book- 
keeping; if miscellaneous expenses, salaries, and 
other accounts have been raised or lowered or so 
manipulated as to produce large dividends when it 
is the purpose to attract purchasers to the stock; or 
•small dividends, when it is sought to ward off pub- 
lic inquiry or to avoid taxation ; then these state- 
ments are given out clearly for the purpose of de- 
frauding the public, and furnish an additional rea- 



Trusts and Monopolies. 297 

son why the state should exercise a close super- 
vision over their affairs. 

Another objection made to public inspection of 
the affairs of corporations is the fear of exposing 
trade secrets. These are merely private means of 
manufacturing or producing certain articles, such 
as are usually protected by patents, but which some 
persons prefer to preserve by maintaining strict 
secrecy among all those concerned in the process 
of their production. 

The public is directly interested in every new 
invention or discovery in science or the arts, which 
either serves any useful purpose or adds to the 
general store of knowledge, and it has a right to 
secure to the people the benefits arising from their 
application, and to take all necessary precautions 
to prevent them from being lost through the death 
of their inventors or discoverers, or those to whom 
the secrets may have been imparted. The Govern- 
ment of the United States, as well as all other 
civilized nations, has exercised this right by the 
adoption of patent laws, which secure to every in- 
ventor or discoverer the exclusive and absolute con- 
trol of his invention or discovery for a definite 
number of years, during which time he may use it 
freely and openly without fear of interference with 
his rights by any one, and affords him the means 
of obtaining full redress in the courts for any in- 
fringement or invasion of them ; but after the ex- 
piration of the period for which the patent is 
granted, the invention or discovery becomes public 
property and any one may manufacture, use or 
vend it at pleasure. 

This government has never exercised the right to 



298 Combinations, 

compel inventors, discoverers or authors to bring 
their works within the protection of the laws made 
for that purpose, though it is claimed by many that 
the public has an absolute right in every new in- 
vention or discovery, even as against the inventor 
or discoverer himself, on the principle that it is not 
merely the genius or skill of the individual which 
has enabled him to attain such results, but that it 
is the combined knowledge and experience of the 
whole community which have educated him up to 
that point of efficiency, which have produced the 
conditions and surroundings which have made his 
achievement possible, and which have placed him 
in the position to se? that which he is said to 
have discovered. But we are now considering the 
relations of corporations to the government, and 
not the relations of the individual to the commu- 
nity, and we shall, therefore, notice this right of 
the individual to the exclusive use of his invention, 
only in so far as he calls upon the government to 
assist him in the exercise of it. 

Some writers have found much difficulty in en- 
deavoring to apply public inspection to the affairs 
of corporations without exposing these trade se- 
crets, the right to which they admit, but we hold 
that any man who is unwilling to trust his inven- 
tion to the protection of the laws which the people 
have made for his benefit, is unworthy of citizen- 
ship in the government under which he lives, and 
should not be afforded the assistance of the cor- 
poration laws to enable him and his associates to 
preserve in secrecy that which it is the policy 
of all governments to make public at the earliest 



Trusts and Monopolies. 299 

possible moment consistent with due compensation 
to the inventor. 

If our patent laws do not afford adequate pro- 
tection to inventors, they can be amended; but no 
pains should be taken to enable inventors to be- 
come patent law^s unto themselves, and the fear of 
exposing this class of secrets should constitute no 
obstacle to the immediate application of state su- 
pervision to the affairs of corporations. 

The importance of the subject of trade secrets 
has greatly diminished in recent years, and the 
practice of preserving \hem is rapidly falling into 
disuse. In nearly all of our important industries, 
those interested in the same line of business 
may readily obtain leave to visit and inspect 
each other's plants, and it is customary to 
exchange such visits both with the producers of this 
country and of foreign nations. 

The necessity for public inspection of the affairs 
of the very large and the very small corporations 
being thus apparent, what reason is there in princi- 
ple why the same inspection should not also be ap- 
plied to those of medium size? If they have not 
worked as much injury or fraud upon the public, 
it has in many instances been simply because they 
have not been able to attract the same amount of 
attention to their affairs or confidence in their pa- 
per, and in all cases a systematic supervision of 
the conduct of their business will serve in many 
ways to keep them from falling into evil prac- 
tices. In respect to those corporations which are im- 
properly managed, an exposure of their methods 
w r ould be a direct benefit to the people ; while w T ith 
those which are conducted in a straight business- 



300 Combinations, 

like manner, it would serve to strengthen public 
confidence, thus benefiting the corporations; and 
it does not appear likely that publicity would 
prove to be at all injurious to those whose methods 
are fair and whose purposes are honest. 

By state supervision and inspection of the affairs 
of corporations, all the abuses which it is the pur- 
pose of the Interstate Commerce Commission to 
remedy among railroad companies, can be pre- 
vented in manufacturing and business corporations,, 
for the state possesses complete control over them; 
and when their misconduct shall have been brought 
to the light, it has full power to deal with them and 
to impose such regulations as it may find necessary. 

Most of the evils to which we have referred in 
the preceding pages, would cease to be practiced 
merely because of the exposure of them, the temp- 
tations and opportunities for dishonest practices 
which secrecy of action affords would be removed, 
the provisions of the present corporation laws could 
then be practically enforced, honesty and fair deal- 
ing would be encouraged, and the necessary in- 
formation to enable the state to enact such new 
laws and regulations as the situation might re- 
quire, would always be at hand. 

Many restrictions and penalties are now im- 
posed upon corporations for the purpose of pre- 
venting some of the more familiar evils to which 
the public have been subjected, such as the issuing 
of false statements or reports ; the pa)^ment of un- 
earned dividends, the incurring of excessive in- 
debtedness and the like. But how can these pro- 
visions be enforced so long as the state has no means 
of knowing the true condition of the affairs of the 



Trusts and Monopolies. 3011 

corporation, what its earnings really have been, 
or what are its true assets and liabilities? Of 
what value is the sworn statement or report of an 
agent or officer of a corporation, so long as the 
state has no means of learning whether it is true 
or false ? 

A large part of the objection to state super- 
vision of corporations, and of the hesitancy on the 
part of legislative bodies to adopt it, arises from 
the popular feeling that the various kinds of busi- 
ness in which they are engaged have always been 
regarded as the subject of strictly private affairs. 
It is true that these industries have been and still 
are looked upon as belonging peculiarly to the 
sphere of private enterprise so long as they con- 
tinue to be the property of individuals and remain 
subject to personal supervision and management; 
but when they come to demand more powerful 
forms of organization to conduct them, it is an ac- 
knowledgment that they have outgrown the capac- 
ity of individual control. This new form of or- 
ganization demanded must possess extraordi- 
nary powers and privileges; it must be more 
powerful than individuals; it cannot be created 
by those persons who desire to employ it ; it must 
come from the supreme power in the land which is 
the government. The government is established 
for the equal benefit of all its citizens and cannot, 
therefore, be presumed to grant special powers and 
privileges to any set of incorporators merely for 
the private benefit of the few individuals who are 
directly interested in the corporation. It follows, 
therefore, that whenever a corporation is created, 
no matter for what purpose it may be, there are 



302 Combinations, 

certain rights reserved to the government for the 
benefit of the whole people, from whom, in theory, 
these special powers have been drawn, and the duty 
of preserving these rights rests with the govern- 
ment. The state, it is true, has in most instances 
neglected to insist upon the supervision necessary 
to preserve its rights in the management of corpor- 
ate affairs, and the long disuse of the authority to* 
exercise such supervision has led most of us, includ- 
ing the corporations, to forget that it ever existed ;. 
but the right still exists; the power to enforce 
it remains in the state, and immediate steps should 
be taken to exercise it without further delay. 

This right of privacy which is claimed by corpo- 
rations, also applied with equal force to the busi- 
ness of banking until within the last thirty or forty 
years; but since the establishment of the national 
banking system by the Government of the United 
States, it has maintained a strict supervision and 
inspection over the affairs of all banks organized 
tinder its laws. This has not in any way inter- 
fered with the successful management of these 
banks; no one has complained of the exposure of 
private business methods or of the intermeddling 
of competing concerns; the rights of the public 
have been preserved; yet the business has proved 
highly profitable to the members of these corpora- 
tions. No one has been driven from the business 
because of this public supervision to which their 
private affairs have been subjected, but on the con- 
trary, the number of these national banks has con- 
stantly increased until they have very generally 
supplanted the state banks ; and if the rate of their 
increase has diminished during the last few years > 



Trusts and Monopolies. 303 

it has been because of the tendency to merge the 
smaller ones into larger and more powerful insti- 
tutions, and not because of any dissatisfaction with 
the system under which the business is conducted. 
We have all become accustomed to the exercise of 
public supervision over national banks, and since 
it has proved so successful with this class of cor- 
porations, why can it not, with equal justice and 
success, be applied to those engaged in manufactur- 
ing or in general business ? 

The United States Government has established 
the Interstate Commerce Commission for the pur- 
pose of exercising supervision and a large degree 
of control over the affairs of railroad companies. 
Many of the states have also established more or 
less thorough systems of inspection of the affairs of 
companies engaged in the operation of railroads, 
warehouses, etc., a certain degree of supervision 
is exercised over factories, tenement houses and the 
like, whether they are operated or controlled by 
corporations or by private individuals, and all are 
familiar with the exercise of public inspection over 
the sale of milk, meat and various kinds of food, of 
gas, oil and various commodities, so there is noth- 
ing new or revolutionary in the proposition to make 
this supervision more thorough and general in its 
application. 

By public supervision and inspection of the af- 
fairs of corporations, it is not meant that their 
books shall be kept open for the accommodation of 
every curiosity seeker who may chance to come 
that way. It is intended that they shall be open 
to the inspection of regularly constituted state 
officers appointed for the purpose, who shall at all 



304 



Combinations, 



times have access to them; who shall have power 
to require them to be kept in accordance with some 
established system of bookkeeping in order to show 
the true condition of the business; who shall 
promptly report all violations of the law to the 
proper officers whose duty it shall be to institute 
immediate proceedings against the offenders. A 
report should also be required to be made at stated 
periods to the governor of the state, showing the 
standing and general condition, together with such 
pariculars as the law may require, of every corpora- 
tion doing business in the state. This is substan- 
tially the same as the reports that are now made 
by the bank examiners to the proper officials on the 
condition of the national banks, and of the build- 
ing and loan associations by the various state au- 
ditors. 

The mere exposure of the acts of corporations 
to the public gaze, would in itself be sufficient to 
cure many of the evils which have made large cor- 
porations so odious to the public, just as the light 
of the sun is sufficient to kill many germs of dis- 
ease in the human body, even the deadly microbes 
which we are told infest the water we drink, the 
food we eat, and the air we breathe, being rendered 
harmless if exposed to its full rays for only a few 
moments; but public inspection of corporations 
should be coupled with the power to remedy evils 
when they are discovered, and we believe that the 
light that may be obtained from a close inspection 
of their affairs, will furnish a truer guide to a 
fair and amicable adjustment of the relations be- 
tween the corporations and the public than any 



Trusts and Monopolies, 305 

system that can be devised from the study of their 
mere external relations and appearances. 

What is called watering of stock is one of the 
evil practices most commonly complained of in 
connection with corporations. By watering of stock 
is meant the issuing of certificates of stock, for 
which no money or other property has been paid, 
and which, therefore, represents no increase 
in the value of the company's property. la' 
other words, a company doing business onj 
a capital of fifty thousand dollars, all of' 
which has been paid in and regularly invested, 
has "earned a sufficient amount of profit during? 
the year to pay a dividend of ten or twelve 
per cent. ; but its directors, fearing that the pay- 
ment of so large a dividend might attract public 
criticism, and perhaps inquiry into the business, 
resolve to increase the capital stock to one hundred 
thousand dollars, and this is done by merely adopt- 
ing a resolution to that effect, filing the necessary 
papers with the state officers and issuing the stock 
certificates. The same profits are then distributed 
at the rate of five or six per cent, upon the in- 
creased capital, and the business is said to be only 
fairly profitable. There has not been a dollar added 
to the assets of the company to support this extra 
fifty thousand dollars worth of stock which has been 
issued, but the public has no means of knowing 
this, and it is put upon the market for sale in pre- 
cisely the same manner as the original stock has 
been offered, and just as though it represented an 
actual investment of capital to the amount of the 
full face value of the stock, while in truth it 
merely represents an investment of only one-hlf 



306 Combinations, 

of that value. This stock is sold on the market for 
as high a price as the public can be induced to pay 
for it, and the inside operators are thus frequently 
enabled to reap large profits from purchasers who 
have not learned of the recent inflation of the stock 
in which they are investing. 

This practice of issuing new stock for the pur- 
pose of reducing the rate of dividends to be paid, is 
sometimes spoken of as the issuing of stock against 
the earning power of the corporation. This method 
of capitalization is justified by some economists, 
and aside from the deception practiced upon the 
public, and the powerful influence which it exerts 
in maintaining fictitiously high prices, it might 
not be so seriously objectionable if the public could 
be guaranteed that a given rate of dividends could 
be maintained ; but it looks very much like a one- 
sided proposition, for while the issue of stock is 
increased when the profits are large, it is never 
contracted when they diminish, and the stock- 
holder finds himself obliged to accept decreasing 
profits while he has only half the security for his 
money that the original shareholders held. Yet 
this increased volume of stocks remains as the nomi- 
nal capital upon which dividends are expected to 
be paid, and serves therefore to increase the cost of 
production and consequently to increase prices to 
the consumers. 

Stocks are watered in this way for various pur- 
poses, one of which is to avoid the appearance of 
making exceptionally large profits, as has just 
been described; another is to reduce the value of 
the individual shares of high priced stock in the 
hope of securing a more ready sale for it on the 



Trusts and Monopolies. 307 

public market; and a third use of watered stock 
is the compensation of the promoters of these large 
corporations. Large blocks of this stock are given 
to these promoters, for which nothing has been paid, 
which represents no value in the corporation, but 
which they place upon the market ; and they thus 
proceed to collect from the outside public millions 
of dollars as compensation for their services in 
organizing these same combinations of capital which 
the political representatives of the people are tax- 
ing their best ingenuity to restrain. 

The most common explanation offered in cases of 
the consolidation of large concerns, for the issuing 
of stock in excess of the value of their tangible 
property, is that it is to pay for good-will. A more 
convenient form of asset could hardly be con- 
ceived for the purpose, for there is nothing less 
susceptible of exact measurement than good-will 
in business. It depends upon so many varying 
conditions; its value is so liable to be overesti- 
mated by those who have it for sale, and its very 
existence is so apt to be entirely imaginary, that we 
think it should be confined within very narrow 
limits and given very little consideration as an as- 
set against which to issue securities, or as a prin- 
cipal upon which dividends must be paid. We are 
willing to concede the claim to a reasonable amount 
of good-will in cases where a reputation and de- 

• mand have been created for a particular article, 
or a special brand, by means of extra care in its 
preparation, by reason of many years devoted to the 
development of the business, or by means of exten- 
sive advertising ; but in the case of staple articles, 

v in the manufacture of which these large corpora- 



308 Combinations, 

tions are chiefly engaged, which, sell upon their 
merits, and the demand for which depends upon 
the necessities of the people, there would seem to 
be but little or no foundation for the claim to good- 
will. More especially is this true since it is the 
purpose of these large combinations to create a 
virtual monopoly in their products, and it makes 
but little difference whether they have the good 
or the bad will of their former customers, for they 
must still continue to buy from them or go with- 
out. 

A mild admission of the practice of watering 
the stocks of corporation is to be found in the re- 
plies to the questions sent out by the Department of 
Labor of the United States, and published in the 
Bulletin of Labor, No. 29, July, 1900, asking in- 
dustrial combinations to report as to what percent- 
age the original cost of their plants, the cost of 
reproducing the plants actively employed, and their 
working capital, bore to their stock issued, to which 
twenty-four combinations responded. Twelve re- 
ported that the original cost of the plants entering 
into the combinations was fifty-five and fifty-eight- 
hundredths per cent, of the stock issued by them; 
ten reported that the original cost of the active 
plants of the combinations was fifty-six and ninety- 
two-hundredths per cent, of the stock issued; fif- 
teen reported that the estimated cost of reproduc- 
tion of plants of the same capacity as those actively 
engaged in manufacturing was forty-eight and 
twelve-hundredths per cent, of the capital stock; 
and twenty-three reported that their working capi- 
tal was sixteen and thirty-hundredths per cent* 
of their capital stock. Thus it will be seen that* 



Trusts and Monopolies. 309 

taking the working capital and the cost of repro- 
duction of the active plants together, the capital 
actually invested at its cash value would amount to 
sixty-four and forty-two-hundredths per cent, of 
the nominal capitalization; or if, in place of the 
cost of producing the active plants, the original 
cost of those plants be substituted, the above per 
cent, will be increased to seventy-three and twenty- 
two-hundredths. 

A further evidence of the extent to which stock 
watering has been carried by these large combina- 
tions, as well as an illustration of how little the 
public can really learn of their affairs by merely 
taking note of their capital stock, is afforded by 
the latest phase of combination management, which 
is to reorganize by reducing their capital to a small 
percentage of what it has been heretofore, while 
still retaining the same properties and business as 
under the heavy capitalization. Thus, the Con- 
tinental Tobacco Company, capitalized at one 
hundred million dollars, the American Tobacco 
Company at seventy million dollars, and the 
Ogdens Cigarette Company, of England, at 
one million dollars, were, in 1901, merged 
into the Consolidated Tobacco Company with 
a capital stock of only forty million, but 
with a funded indebtedness of over one hun- 
dred fifty-six million dollars. All of the prop- 
erties owned by the old combinations are now held 
by the Consolidated Tobacco Company, but its 
capital stock is less than twenty-five per cent, of 
the total stock of the merging companies. The 
Distilling Company of America, with a capital of 
eighty-five million dollars, was organized in 1902 



310 Combinations, 

into the Distillers' Securities Corporation with a 
capital of only thirty-two million five hundred 
thousand dollars; and still later the American 
Steel Hoop Company with a capital oftthirty-three 
million dollars, and the National Steel Company 
with a capital of fifty-nine million, the Carnegie 
Steel Company with a capital of one hundred sixty 
million dollars, have been merged into the National 
Steel Company with a capital of only sixty-three 
million dollars. In each of these cases, the new 
combination owns all of the properties and conducts 
the same business as did its several members be- 
fore they merged, and it is worth just as much 
under the new capitalization as it was under the 
old. It is difficult to say what is the controlling 
motive in this latest movement of combinations, 
but it is probable that one of the chief purposes 
of the change is to avoid the payment of taxes uport 
their capital stock. It is probable, therefore, that 
in the future we shall not hear so much of the or- 
ganization of great combinations with enormous 
capitalization, and that we shall hear more of the 
formation of combinations which control even 
greater property interests, but which have but a 
comparatively small nominal stock. It is likely, 
however, that the market value of the stocks of 
these new combinations will soon approximate the 
total values represented by the stocks of the old 
concerns, and our revenue laws should be amended 
so as not to allow these combinations to escape 
legitimate taxation by merely changing the form 
of their title deeds. 

It will be perceived, from what has been said, 
that the watering of stock depends for its success 



Trusts and Monopolies. 3111 

chiefly upon the secrecy with which the actions 
of corporations are guarded and their ability to 
deceive the people; and that public supervision of 
their affairs would render this deception imprac- 
ticable, and place the state in a position to effectu- 
ally prevent this and many other abuses which 
merely require to be exposed in order to enable it 
to remedy them. Some of these abuses, it is true, 
might continue to be practiced for a time even 
under state supervision, but it would be with the 
acquiescence of the people, and only for so long 
as they chose to tolerate it; whereas their right 
to existence now depends upon their ability to de- 
ceive the state and the public as to whether they 
are really abuses of power or merely the necessary 
outgrowth of legitimate business methods. 

Having now agreed to adopt state supervision 
of corporations and thus provide against the prac- 
tice of stock watering and many other evils of cor- 
poration management which may easily be rem- 
edied under existing laws or amendments thereto 
when the state has been fully informed as to all 
the facts involved; we now come to consider the 
source of the chief evil of monopoly, namely, its 
power to raise prices and to extort excessive profits 
from the people. 

Since the modern monopolist has very generally 
assumed the corporate form of organization which 
we have just agreed to subject to state supervision, 
we are now presumed to be in a position to know 
when this power to fix prices is being exercised 
unnecessarily to the injury of the public ; but under 
the present method of dealing with corporations 
it may be commonly known that they have fixed 



'312 Combinations, 

prices sufficiently high to yield enormously large 
profits, and yet the state be held powerless to in- 
terfere with them on that ground alone, as in the 
case of the Standard Oil Company, the dividends 
of which have reached as high as forty-eight per 
cent, per annum, according to its published state- 
ments. The state, it is true, might, under pres- 
ent practice, attack these corporations on the 
ground of creating a monopoly or conspiracy in re- 
straint of trade, for the power to raise prices im- 
plies the power to corner the market and thus more 
or less to restrict trade, and it might dissolve 
corporations which offend in this way, just as was 
done in the instances already shown of prosecutions 
under the anti-trust acts of the several states; 
but these large corporations are capable of doing 
much good as well as evil. The great economies 
which they achieve in production may enable them 
to afford lower prices and better service to the 
people; their improved facilities for extending 
trade into foreign countries may furnish more 
regular and steady employment to their employees, 
and their destruction is therefore not to be desired 
if their evil propensities can be eliminated. 

Shall the remedy be applied to large corpora- 
tions only? If so, to what size? Where shall the 
line of distinction be drawn? But small corpora- 
tions are liable at times to offend in this way as 
well as large ones, and monopolies are not always 
the result of a combination of small concerns sud- 
denly united into the form of a large corporation, 
but are frequently the result of a more or less 
gradual growth, and it is altogether likely that 
the germs of monopoly might have been found in 



Trusts and Monopolies, 313 

the ambitions of the officers and members of these 
smaller concerns, long before they had attained to 
proportions which were considered inimical to the 
interests of the public. It appears, then, that size 
cannot be adopted as a means of classification, and 
that some remedy should be devised which will be 
alike applicable and equitable, at least, to all cor- 
porations. 

The price of commercial articles depends upon 
so many varying conditions of supply and demand, 
upon the rates of wages to be paid, the price of 
raw materials, the cost of transportation, etc., that 
it would be practically impossible for the state 
to fix a standard of prices that would remain fair 
to all parties much longer than the time it would 
require to establish it. We must, therefore, look 
to some other means of regulating this power of 
monopolies. 

The purpose of establishing and maintaining 
artificially high prices is to obtain an unusually 
large share of profits from a moderate amount of 
business. The particular point in monopolies to 
which all of the people object is their disposition 
to extort excessively large profits from the pur- 
chasing public. If prices are high and wages are 
correspondingly so, a portion of the people at least 
share in the benefits of the enhanced charges, and 
the profits are in a measure divided; but when 
prices are high and wages low, the cost of ma- 
terials for production remaining the same, the 
profits become unreasonably large and they all go 
to the monopolists, while no part of the people 
share in the benefits of the high prices which all 
are obliged to pay. Why not, then, strike directly 



314 Combinations, 

at the profits, and apply the remedy to that whicK 
is, at once, both the end and the immediate cause 
of the greatest oppression of the people? 

Take away the power of monopolies to reap un- 
reasonably large profits, and you remove the in- 
centive which leads them to grind the people be- 
neath their feet in order to obtain them. Limit 
them to the acquisition of a reasonable return upon 
the capital actually invested in their business, and 
you effectually check many of the excesses which 
the greed for gain is constantly urging them to 
employ in order to increase their profits, but will 
not stifle that ambition which stimulates them to 
strive for new and greater possibilities in business, 
in the hope of securing an adequate, but legitimate, 
reward. Limit the profits which corporations shall 
be allowed to earn, to a certain percentage upon 
the capital actually invested in their business, re- 
quiring them to return to the people all that may 
be earned in excess of that percentage in the form 
of reduced prices of their products, and you draw 
the venom from the monster which is now terroriz- 
ing the community, and leave him a harmless but 
powerful and useful servant of society. Deprive 
them of the power to increase their own profits by 
depressing the wages of their employees to the 
lowest possible level, and you remove the chief 
cause of that incessant warfare which is ever going 
on between capital and labor; you eliminate the 
one great obstacle to the establishment of a fair 
and satisfactory scale of wages for all classes of 
labor, and place employer and employee in a posi- 
tion to become truly united in purpose, for their 
interests will no longer conflict, but must become 



Trusts and Monopolies. 315 

mutually dependent upon the volume of business 
transacted. 

The objection will at once be made that this 
would be an unwarrantable invasion of the natural 
right of every man to secure the best possible com- 
pensation for his labor, skill or foresight, whether 
it be expended in direct application of physical 
labor, in the management or prosecution of busi- 
ness in which large amounts of capital may be em- 
ployed, or in the direction of the labor of other 
men. To this we reply that the right of a man 
to secure the greatest possible return upon capital 
when accompanied by the expenditure of personal 
skill or supervision as in the management of a 
business, is no greater than that which entitles 
him to obtain the largest possible amount of return 
upon the same capital when unaccompanied by such 
personal services; and that, therefore, a man is 
justified in procuring the highest rates of interest 
on money which he is about to loan that his shrewd- 
ness in bargaining can enable him to obtain. As 
an elementary proposition, this is just as sound as 
the theory that a man is entitled to secure the 
largest possible amount of profits upon capital 
which he has invested in business; but we have 
become accustomed to the placing of restrictions 
upon the rates of interest to be charged for the 
use of money, and no one now thinks of question- 
ing the right of the state to do so. 

As money is now generally regarded as property, 
or as the equivalent or representative of property, 
there would seem to be no good reason why a per- 
son should not be allowed to exercise the same 
power of disposition and employment over it as 



316 Combinations, 

he does over other forms of property. It is true 
that in early times it was considered unlawful to 
receive interest upon money loaned, and that in 
this respect it was considered as an exception to the 
rights which pertained to other forms of property; 
but in modern times, this distinction has been done 
away with, and a person is now as fully protected 
in requiring interest for the use of his money as 
in demanding hire for the use of any other form 
of property. 

We have, however, restricted the right to receive 
interest on money loaned, to what is considered a 
reasonable rate for the use of it. As early as the 
reign of Henry the Eighth, the legal rate of in- 
terest to be charged for the use of money, in Eng- 
land, was fixed by statute laws at ten per cent, 
per annum, which was afterwards reduced to eight 
per cent., to six per cent., to five per cent., and so 
on until about the seventeenth year of the reign 
of Queen Victoria, when all legislation upon the 
subject was repealed. 

But why should we restrict the rate of compen- 
sation to be charged for the use of money, any 
more than that to be charged for the use of a 
horse ? Mr. Blaekstone says : "To demand an ex- 
orbitant price is equally contrary to conscience, 
for the loan of a horse, or the loan of a sum of 
money, but a reasonable equivalent for the tempo- 
rary inconvenience which the owner may feel by 
the want of it, and for the hazard of his losing it 
entirely, is not more immoral in one case than it 
is in the other." If it is equally unconscionable 
and immoral, it is equally unjust and should be 
made equally illegal. 



Trusts and Monopolies. 3 17J 

Why should a man who has money to lend be 
required to accept five per cent, for the use of it^ 
while the borrower is allowed to make fifty per 
cent, upon the investment of the same money ? If 
it be said that the rates of interest are fixed by law 
in order to prevent money lenders from taking ad- 
vantage of the necessities of the borrowers and 
exacting excessively high rates of interest from 
them, we ask, are not many of the borrowers in 
like manner availing themselves of the needs of the 
public in exacting forty or fifty per cent, profit 
upon the money which they invest in business? 
Why should a man be obliged to accept five per 
cent, on his money if he loans it to another, but 
allowed to make one hundred or even a greater 
percentage upon the same money if he invests it in 
business or in property of any kind? The truth 
is, there is no just distinction to be made between 
the earnings of money pure and simple when let 
out as a loan, or when invested as capital in busi- 
ness, save the difference in the risk involved, and 
the uncertainty of regular returns, and these points 
can be taken into account in determining the rates 
of profit to be allowed by law. 

The right of the state to regulate the rates of 
interest to be charged for the use of money is 
founded in the power and duty of government, to 
which we have before referred, to protect every in- 
dividual from oppression by the wealthy and the 
powerful, and the right extends equally to the 
regulation of the use of every other kind 
of property as well as money. Every in- 
dividual has an undoubted right to use his 
own property as he pleases and to charge 



3 18 Combinations, 

for it whatever price he will, so long as he does 
not interfere with the rights of other individuals; 
but whenever he acquires a monopoly of any ar- 
ticle which is essential to the comfort or conven- 
ience of other members of society, or involves the 
aid of government to assist him in the conduct of 
his business, he subjects himself to the right of the 
government to interfere in his affairs so far as may 
be necessary to protect the rights of all its citizens. 
The rule laid down by Lord Ellenborough in the 
English case of Alnutt versus Inglis, to which we 
have before referred, applies as well to the affairs 
of industrial combinations as to natural monop- 
olies, and as it is so clearly in point we shall re- 
peat it here. He says: "There is no doubt that 
the general principle is favored, both in law and 
justice, that every man may fix what price he 
pleases upon his own property for the use of it; 
but if for a particular purpose the public have a 
right to resort to his premises and make use of 
them, and he have a monopoly in them for that 
purpose, if he will take the benefit of that monop- 
oly he must as an equivalent, perform the duty 
attached to it on reasonable terms." The futility 
of legislative attempts to regulate the rates of in- 
terest is now quite generally conceded, but the 
right of government to impose such restrictions, 
if they could be enforced, has not, we believe, been 
seriously questioned. 

The reasons for the establishment of limitations 
upon the rates to be charged for the use of money 
are to be found, in the first place, in the fact that 
in early times loans were chiefly made for the pur- 
pose of purchasing tools or farming implements > 



Trusts and Monopolies. 319 

seed, stock, etc., or in cases of great distress, and 
it was thought to be taking an undue advantage 
of the unfortunate, as well as being unchristian- 
like, to exact from the debtor the repayment of a 
greater sum than he had borrowed. As trade de- 
veloped, however, and loans began to be made for 
commercial purposes, thus becoming the means of 
securing large profits to the borrowers, the pay- 
ment of moderate rates of interest for the use of 
money began to be tolerated. But in deference to 
the long established moral objection to the ac- 
ceptance of interest of any kind, and in order to 
protect those for whose benefit the moral prohibi- 
tion had been invoked, from unreasonable oppres- 
sion, it was determined to establish a legal rate 
of interest which might be charged for the use of 
money, and, at first, the exaction of a higher rate 
than this was called usury, and was made punisha- 
ble by severe penalties. In more recent times it has 
been the practice, in some jurisdictions, to establish 
what is usually termed a legal rate which must pre- 
vail in all cases in which the parties have not 
agreed upon any specified rate, and also a higher 
rate commonly known as the contract rate, up to 
which the parties are at liberty to contract. In 
the next place, the money of civilized nations is 
seldom left free to follow the natural requirements 
of trade to the same extent that other commodities 
are, but it is coined and issued by the government 
itself or by banks which are subject to its control. 
Thus the supply of money is increased or dimin- 
ished by artificial means, though it is supposed to 
follow the requirements of a reasonable supply and 
demand as understood by the persons who happen 



320 Combinations, 

to be, at the time, intrusted with the administra- 
tion of the affairs of government. But the regula- 
tion of the supply is always presumed to be for 
the benefit of the whole people, and as it was feared 
that some individuals might take advantage of 
special conditions and make an unreasonably high 
price for the use of money, it was thought best to 
establish a uniform rate for all. 

After endeavoring for over three hundred years 
to regulate the rate of interest by law, it gradu- 
ally began to be perceived that the legislative pro- 
visions on the subject had, in a large measure, 
failed to accomplish the purpose for which they 
were intended, and economists are now pretty well 
agreed that the economic effect of placing limita- 
tions upon the rates of interest has been to raise 
the rate of interest actually paid, rather than to 
lower it; or, in other words, that restrictions have 
failed to restrict, and that the law of supply and 
demand has proved to be more potent than statu- 
tory enactments. At times when money was scarce 
and the demands of the borrowers were pressing^ 
both parties conspired to evade the law by paying 
in excess of the established rates of interest, and as 
in many places .this jeopardized the entire prin- 
cipal, lenders have exacted an additional amount 
of interest by way of insurance against the risk 
involved. While these provisions have thus fallen 
far short of attaining the ends for which they were 
designed, they have undoubtedly deterred many, 
especially among the unprofessional lenders, from 
demanding excessively high rates, and have thus 
been a benefit to many of the poorer class of bor- 
rowers ; and though all attempts at legal regulation 



Trusts and Monopolies. 32 l 

of the rates of interest have been abandoned in 
England, the practice is still adhered to by nearly 
every other civilized nation, and similar laws are 
to be found on xhe statute books of most of our 
own states. 

The failure of all attempts, by legislation, to en- 
force the observance of a uniform rate of interest 
is due to the fact that whatever restrictions or 
burdens may be placed upon the making of loans, 
must eventually be borne by the borrower, and 
this is the vital distinction between the attempted 
regulation of interest and the proposed limitation 
upon the rate of profits. Another source of weak- 
ness in the usury laws is that they have sought only 
to affect the rates of interest upon loans without 
attempting to reach the natural interest on cap- 
ital used in production. 

Economists are agreed that a tax upon loans, no 
matter how it may be imposed, will always be 
shifted so as to fall upon the borrower, but they 
are equally agreed that a tax levied upon all profits 
must remain with the payer and cannot be shifted. 
John Stuart Mill, speaking of a tax on profits, 
says: "A tax on profits, like a tax on rent, must, 
at least in its immediate operations, fall wholly on 
the payer. All profits being alike affected, no re- 
lief can be obtained by a change of employment. 
If a tax were laid on the profits of any one branch 
of productive employment, the tax would be vir- 
tually an increase of the cost of production, and 
the value and price of the article would rise ac- 
cordingly, by which the tax would be thrown upon 
the consumers of the commodity, and would not 
affect profits. But a general and equal tax 011 



322 Combinations, 

all profits would not affect general prices, and 
would fall, at least in the first instance, on capi- 
talists alone. 

"There is, however, an ulterior effect, which, in 
a rich and prosperous country, requires to be taken 
into account. It may operate in two different 
ways: (1) The curtailment of profit, and the con- 
sequent increased difficulty in making a fortune 
or obtaining a subsistence by the employment of 
capital, may act as a stimulus to inventions, and 
to the use of them when made. If improvements 
in production are much accelerated, and if these 
improvements cheapen, directly or indirectly, any 
of the things habitually consumed by the laborer, 
profits may rise, and rise sufficiently to make up 
for all that is taken from them by the tax. In 
that case the tax will have been realized without 
loss to any one, the produce of the country being 
increased by an equal, or what would in that case 
be a far greater amount. The tax, however, must 
even in this case be considered as paid from profits, 
because the receivers of profits are those who would 
be benefited if it were taken off. 

"But (2) though the artificial abstraction of 
a portion of profits would have a real tendency to 
accelerate improvements in production, no consid- 
erable improvement might actually result, or only 
of such a kind as not to raise general profits at 
all, or not to raise them so much as the tax had 
diminished them. If so, the rate of profit would 
be brought closer to that practical minimum to 
which it is constanly approaching. At its first im- 
position the tax falls wholly on profits; but the 
amount of increase of capital, which the tax pre- 



Trusts and Monopolies. 323 

rents, would, if it had been allowed to continue, 
have tended to reduce profits to the same level; 
and at every period of ten or twenty years there 
will be found less difference between profits as they 
are and profits as they would in that case have 
been, until at last there is no difference, and the 
tax is thrown either upon the laborer or upon the 
landlord. The real effect of a tax on profits is to 
make the country possess at any given period a 
smaller capital and a smaller aggregate production, 
and to make the stationary state be attained earlier, 
and with a smaller sum of national wealth." 

A tax on profits would afford no relief to the 
present situation, for though it might deprive the 
combinations of some portion of their ill-gotten 
wealth, it would fall alike upon the just and the 
unjust, and thus prove an injury to many of those 
whom it was intended to relieve. Or, if a given 
rate of profits be exempted from taxation, as is 
now done in many places with household goods, 
mechanics' tools, etc., the tax collected upon the 
excessive profits would only be a portion of that 
which is wrongfully taken from the public and be 
but a partial measure of relief, while if the whole 
of the excessive profits were confiscated to the state,, 
the benefits resulting from it would be purely 
local and the people would not be relieved of the 
burden of high prices. Taxation of profits, then, 
would not afford the relief sought. 

A limitation upon the rate of profits is precisely 
the same in principle as a tax on profits. The 
weight of the burdens thus imposed cannot be cast 
upon the consumer of the commodity from the 
production of which the profit has been derived > 



324 Combinations, 

and it secures all the beneficial results of such 
taxes, except the cash which it is not intended to 
collect, while it avoids their objectionable features. 
It serves to stimulate invention and industry in the 
manner suggested by Mr. Mill, but precludes the 
evil consequences which he says might follow from 
the imposition of a tax, by not attempting to reduce 
profits below the normal level. 

Writers on political economy have heretofore 
held that competition and the shifting of capital 
from one industry to another would always reduce 
profits in all lines of industry to what they term 
"the ordinary rate of profit" ; but conditions have 
so completely changed within the last few years, 
and co-operative control has so generally supplanted 
the competitive system in the industrial field, that 
these old safeguards can no longer be relied upon 
to protect the people from unjust extortion. Pro- 
fessor Richard T. Ely speaking of the subject 
concludes as follows : "It is to be noted that while 
pure profit, apart from the gains due to a happy 
combination of affairs (conjuncture), is largely a 
surplus produced by genius, and is in so far no 
burden to the community which tends to profit by 
it eventually, monopoly profit is a surplus extorted 
by power and privilege, and invariably a loss to 
the community. Distribution of wealth comes in- 
creasingly under the influence of monopoly. The 
economic surplus yielded by monopoly is the source 
of maliy of the largest fortunes of our day, and is 
the prime cause of the growth of inequalities of 
fortune during the present century. While in gen- 
eral competition increases in severity, an increas- 
ing proportion of the industrial field is withdrawn. 



Trusts and Monopolies. 325 

from competition and falls under the control of 
monopoly. There is thus a growing class enjoying 
special economic privileges." It is this excess of 
profit which is wrongfully taken from the consumer 
by means of the power which monopoly gives to 
I the producer that we wish to reach, and by means 
of a reasonable restriction upon the rate of profits 
to be collected, it is proposed to diffuse the bene- 
fits of improved facilities for production in the form 
of reduced prices among the people. 

Economists are wont to include as one of the 
elements of profit, what they term salaries of su- 
perintendents. This is on the supposition that in- 
dustrial establishments are owned and operated by 
individual proprietors, and the item is intended to 
represent, at least, a part of the profit of the owner ; 
but in this day of trusts and combinations, when 
corporations have assumed control of practically 
every branch of industry, every one who devotes 
any time to the business is paid a fixed salary, 
and these must all be charged under the general 
head of wages and can no longer be classed as an 
element of profit. The other items commonly in- 
cluded as profit ; interest on capital, insurance 
against risk of loss, replacement of capital con- 
sumed and clear profit, are now separately ac- 
counted for in the system of bookkeeping used in 
many of our large industrial establishments and 
can be required to be shown by all, and it is this 
item of clear profit that we wish to restrict within 
reasonable limits. The economic nature of profit 
and its relation to production have been quite fully 
discussed by writers on economics, and it does 
not seem desirable to go any deeper into the sub- 



326 Combinations, 

ject here than is necessary to indicate the manner 
in which it may be affected by legislative provis- 
ions. With public supervision of the affairs of 
corporations once established, it would be an easy 
matter to determine the profits of any given con- 
cern, and it is merely a matter of detail in the 
framing of a statute, to arrange provisions which 
will require these to be kept within the prescribed 
limits. 

Some attempts at legislation in this direction are 
already to be found in the regulation by the state 
of the charges to be made by public service cor- 
porations, such as railroad companies; the regu- 
lation of street car fare; cab and carriage hire; 
telegraph and telephone rates ; warehouse charges, 
and the like; so our proposition is merely to do 
directly and effectively with all corporations, that 
which it has already attempted to do indirectly in 
these cases. 

But, as we have before remarked, we are, in^ 
this discussion, merely considering the application; 
of remedies to corporations, and since these are 
merely creatures of legislation and have no in- 
herent or natural rights of any kind, most of the 
objections to the proposition to limit the profits to 
be derived from business, which are based upon 
the natural rights of individuals, do not relate to 
these cases; while the considerations which have 
been urged in support of its adoption, apply with 
special force to corporations because of the greater 
apparent necessity for it in relation to their af- 
fairs. 

Another distinction which should be carefully 
borne in mind in relation to this proposition is 



Trusts and Monopolies. 327 

this, that it is not proposed to limit the compensa- 
tion to be paid to any individuals for labor, skill, 
judgment, or services of any kind. This is already 
sufficiently restricted by the selfishness of those 
who employ them, and it is not proposed to inter- 
fere with these relations, but it is intended to limit 
the profits to be paid upon capital which is in- 
vested in the business of these corporations, dis- 
tinct from the compensation which is paid to those 
who are in any way engaged in their management. 
The wages and salaries of all employees are now 
determined and apportioned before the profits or 
dividends are declared, and it is with these profits 
that we now propose to deal. 

It may now be suggested that the adjustment of 
wages and salaries would furnish a convenient 
means of appropriating all surplus profits, and that 
it would doubtless be used as a means of defeating 
any restrictive provisions which the law might at- 
tempt to place upon the earnings of the business ; 
but the temptation would be no greater then, than 
it now is, to induce the officers and directors of a 
corporation to appropriate an unreasonably large 
share of the profits to their own use in the form 
of salaries; yet the interest of the stockholders is 
usually sufficient to restrict them to what is con- 
sidered a reasonable amount of compensation for 
their services. The state exercising supervision 
over the affairs of corporations would have a much 
better opportunity of knowing the condition of 
the business and be far more capable of enforcing 
its will than the stockholders now are, and why 
should it not be as successful in restricting cor- 
poration management within the bounds of rea- 



328 Combinations, 

sonable expenses? "Under the present system of 
strict privacy in the management of corporate af- 
fairs, it would be manifestly impracticable to en- 
force such a remedy as we are now considering, 
and an attempt to do so would be merely placing 
an additional premium upon dishonesty ; but hav- 
ing adopted public supervision of the affairs of 
corporations, it becomes not only possible but easy 
of application. 

The proposed regulation is, of course, intended 
to affect only the clear profits as shown by a true 
account of the operations of the business; and 
that, whether they are held in reserve in the treas- 
ury, invested in the erection of new plants or in 
the extension of old ones, or paid out in dividends ; 
but the public has become accustomed to judge 
of the profits of corporations merely by the rates 
of dividends paid to their stockholders, and it is 
believed that the practical operation of the pro- 
posed remedy will be more generally understood if 
we illustrate it in that way. Dividends are liable 
to include any or all of the elements which con- 
stitute gross profit, but for the sake of convenience 
we shall assume that the rate of profit fixed by law 
is such that together with insurance and the amount 
allowed for replacement, which is virtually a re- 
payment of a portion of the capital invested, it 
will just equal the established rate of interest. If 
conditions were free from the control of trusts and 
combinations, this rate would probably be sufficient 
to attract a large amount of free capital into the 
business and thus lead to a reduction of the profits, 
but they are not ; hence the necessity for legisla- 
tive interference. We shall also assume that the 



Trusts and Monopolies. 329 

legal rate of interest be paid 011 the capital actually 
invested, or necessary for duplication of the plants, 
working capital, etc.; and we then have a legal 
rate of dividends equal to twice the rate of in- 
terest now allowed to be charged on loans. This 
rate would seem to be large enough to satisfy the 
reasonable demands of investors, and yet small 
enough to prevent the excessive profits which many 
of the great combinations are known to extort from 
the people. 

It may seem strange that so high a rate of 
profit, amounting in most states to ten or twelve 
per cent., should be suggested, in view of the fact 
that the public is daily investing its money freely 
in stocks which pay only five, six or seven per cent, 
dividends per annum; but it should be remem- ' 
bered in the first place, that this is merely a rate 
beyond which profit shall not be drawn; and in 
the second place, that the great majority of these 
stocks upon which the public draws five, six and 
seven per cent, dividends, have been so well watered 
that they pay to the inside operators of these cor- 
porations two, three, four and five times these 
rates upon the capital actually invested in the busi- 
ness. 

Lest this estimate of the profits earned by these 
large corporations may seem to those who are not 
familiar with the subject, to be too large to be 
taken seriously, we here present a statement of the 
earnings of the Standard Oil Company for the 
last nine years, as shown by "Poor's Manual of 
Kailroads" for the year 1902. 

The Standard Oil Company has paid dividends 
as follows : twelve per cent, in 1894, twelve per cent. 



330 Combinations, 

in 1895, thirteen, ten, three and five per cent, iii 
1896; ten, ten, five and eight per cent, in 1897; 
ten, eight, five and seven per cent, in 1898; six, 
twelve, five and ten per cent, in 1899 ; twenty, ten, 
eight and ten per cent, in 1900; twenty, twelve, 
eight and eight per cent, in 1901, and forty-five per 
cent, in 1902. 

While this company has thus boldly announced 
its profits to the public, and made itself a conspic- 
uous target for attack, it is believed that many more 
of these large corporations would not appear to be 
so much less guilty of extortion, if they had not 
resorted to the watering of their stocks in order 
to hide their profits. j 

The legal rates of interest to be charged for the 
use of money are not established by law for the 
purpose of fixing the value of money ; that is regu- 
lated by supply and demand, and by the custom 
and conditions of business, just as its purchasing 
power is determined, and the statute merely gives 
definite expression to the law which the custom of i 
the commercial w r orld has already established. The . 
question in the mind of the legislator who is about j 
to frame a statute on this subject, is not — how much | 
can we lower the rates of interest now charged for j 
the use of the mone}^ but — what is the prevailing 
rate now recognized by the business world? It 
would be folly for any state to attempt arbitrarily 
to reduce the rates of interest below that fixed by 
the money market of the state; for as money is 
free to move from state to state, its value is de- 
termined by the conditions which prevail through- 
out the whole country, and a general level of rates 
proportionate to the securities to be obtained, and 



Trusts and Monopolies. 331 

the profits that may be earned, is preserved, and 
any attempt to fix any other value upon it, would 
merely serve to drive the money from the state and 
thus defeat the very purpose which the law sought 
to secure. If it were otherwise, since the borrowers 
are always in the majority, they might just as well 
lower the rate of interest at once to two or three 
per cent., and make good times for all. 

The purpose of these statutes, then, is to pro- 
hibit the overreaching of the prevailing rates of 
interest in extreme cases; to prevent lenders from 
availing themselves of any special advantages which 
they may possess, such as a corner upon the avail- 
able supply of money, etc., or of the ignorance 
or necessities of the borrowers, and it would be just 
the same in establishing a legal rate of profit to 
be earned by corporations. 

The customary course of trade would determine 
what should be considered a fair and reasonable 
average of profits to be derived from business en- 
terprises, and the law should prevent the collec- 
tion of an unreasonable amount in excess of that 
average. We have already unconsciously come to 
recognize what may be termed a reasonable rate 
of profits to be derived from business investment; 
thus, no one objects to a statement showing earn- 
ings of six, eight, or even ten per cent, per annum, 
hut when we speak of thirty or forty per cent., as 
in the case of the Standard Oil Company, there is 
a universal gasp of surprise, and every one feels 
that a gross injustice is being done to the con- 
sumers who pay the prices which produce these 
enormous profits, and that it should be remedied 
in some way. 



332 Combinations, 

A liberal range of profits should, however, be 
allowed at first until the graver offenders can be 
brought within bounds, and the system put into 
working order, and then, in the light of experience, 
the limit may be lowered, as in the judgment of the 
people it may be required, just as has been done 
with the rates of interest upon money loaned. A 
small margin should, also, always be allowed above 
the level of the general average of profits as an 
encouragement to enterprise and invention, and no 
attempt should be made to stamp the speculative 
element entirely out of business, for it is that 
which gives life to trade, and which has, more than 
anything else, led to the wonderful growth and 
development of our industrial system. 

Again, at times the profits in business are liable 
to be very high in one year, and lower in another, 
and to prevent any injustice which might arise t 
from these fluctuations, it would doubtless be neces- 
sary to average the profits from year to year or, 
perhaps, during a number of years. Thus, if the 
legal rate of profit be ten per cent., and the earn- 
ings of a given company for the year are forty per 
cent., a dividend of ten per cent, would be paid, 
but the balance would be held in the treasury for 
the payment of dividends in succeeding years, the 
price of the products would have to be reduced say 
twenty-five per cent, which would still leave a 
profit of five per cent, if business conditions re- 
mained the same, and further reductions and ad- 
justments would have to be made from time to 
time in order to prevent the accumulation of too 
large a surplus. 

The operation of this remedy would thus lead 



Trusts and Monopolies. 333; 

directly to a reduction in the price of those articles 
from the production of which excessive profits are 
now derived, and the knowledge that the legal rate 
of earnings could not be exceeded, would most ef- 
fectively check the natural disposition of monopo- 
lists to raise their charges whenever a favorable 
opportunity to do so is presented. 

From all this it appears that the enactment of 
laws limiting the dividends to be paid by corpora- 
tions to a certain percentage upon the capital act- 
ually invested in their business, would be a rea- 
sonable exercise of the powers of government, that 
it would not be an invasion of any natural right of 
individuals, that it would not be a violation of any 
right which corporations might reasonably expect 
to receive from the state as a necessary incident to 
the powers granted for the prosecution of their 
business, that it would be in perfect harmony with 
the principles of law under which the legal rates 
of interest to be charged for the use of money 
have been established, and the charges of railways 
and other public service corporations have been reg- 
ulated, that it would remedy many of the evils 
which now appeal most strongly to the people for 
redress, that it would tend to establish more harmo- 
nious relations between employers and employees 
and effect a more equal division of the fruits of 
production between capital and labor, and that it 
would, in conjunction with state supervision of the 
affairs of corporations, be practicable, effective, and 
simple of application, and be just, alike to the cor- 
porations and the public. 

Having thus provided for the control of domestic 
corporations which ; as we have before remarked, 



334 Combinations, 

are creatures of the legislative power of the state 
and therefore amenable to any kind of conditions 
■which it may see fit to impose, how are we to regu- 
late foreign corporations which seek to do business 
within our states ? These foreign corporations, like 
our domestic ones, are merely creatures of legisla- 
tive power, and as the legislative acts of any state 
have no force beyond its territorial limits, no body 
or corporation created by it can claim any rights 
or exercise any powers beyond its jurisdiction, ex- 
cept such as may be tolerated by the legislature 
of the state in which it seeks to do business. There 
are no natural rights or constitutional restrictions 
to protect corporations from discriminating or 
oppressive legislation, and their very right to ex- 
istence in a foreign state depends solely upon the 
will of its legislature to allow them to enter its 
territory. 

Mr. Hare, in his lecture on the American Con- 
stitution, speaking on this subject, summarizes the 
decisions of the Supreme Court of the United 
States, as follows: "Corporations are creatures of 
legislation, and have no legal existence beyond the 
jurisdiction of the government to which they owe 
their being. No other government, therefore, need 
recognize them or give them the protection of its 
laws ; save from a comity of which the legislature 
must judge ; and as artificial persons they are not 
within the clause that the citizens of each state 
shall have all the rights, privileges, and immunities 
of the citizens of the several states. A state may > 
i therefore, exclude foreign corporations, or pre- 
scribe the terms on which they shall be permitted 
jto transact business within her limits, and exact 



Trusts and Monopolies. 335 

a license fee as the price of admission; but the 
power must be so exercised as not to hinder, regu- 
late, or burden the commerce among the states or 
with foreign countries, which is exclusively under 
the control of the General Government, whether the 
persons who carry it on are natural or artificial 
citizens of the states, or subjects of a foreign gov- 
ernment; and a statute which imposes limitations 
on the right of companies chartered by other states 
to make contracts in the prosecution of interstate 
commerce, is a usurpation of a power that belongs 
solely to Congress." The several states of this 
country have, heretofore, been so indulgent with 
corporations created by other governments, that 
many persons have taken advantage of their liberal- 
ity, by procuring charters under foreign laws and 
then returning to their domicile and doing busi- 
ness as foreign corporations. In the preceding 
chapter we have already referred to this disposi- 
tion on the part of corporations to seek protection 
of foreign laws, and shown, by an analysis of the 
table of combinations presented in the Twelfth 
Census, the very large percentage of them which 
derive their powers from a single state the laws of 
which are known to be particularly favorable to 
corporation interests, and if any other general list 
of very large corporations be examined, it will be 
found that a great majority of them have been in- 
corporated under the laws of the State of New 
Jersey, no matter in what states their business may 
be actually located. 

The objects which lead corporations thus to pro- 
cure their charters from foreign states are, as has 
already been explained, to escape the taxation which 



336 Combinations, 

is imposed by many states upon the capital stock 
of domestic corporations, and to secure the author- 
ity to exercise certain powers and privileges which 
are not granted to those created under the laws of 
the state to which they naturally belong. As an- 
other instance of the extent to which promoters 
have availed themselves of this leniency of the 
states towards foreign corporations, the statement 
has been recently made that ninety per cent, of the 
foreign corporations which have applied for per- 
mission to do business in the State of Illinois, are 
in reality Illinois corporations which have gone 
elsewhere to procure their charters in order to evade 
the provisions of the Illinois laws. 

This comity between states, or respect for each 
other's acts, has been carried so far in relation to 
this subject as to amount to a practical discrimina- 
tion in favor of foreign corporations. It is now 
time for them to throw aside this conventional rule 
of propriety by which they have been bound, which 
is founded upon the belief that the general legis- 
lative provisions of the several states would become 
substantially uniform, and that the benefits con- 
ferred upon the citizens of other states by the recog- 
nition of their laws, would in a large measure be 
returned by like favors shown to its own people 
abroad ; but which has resulted in a practical ces- 
sion of the power to create corporations, to a few 
states, which power must be respected by all the 
others although they receive nothing in return for 
this extraordinary grant of extra territorial juris- 
diction. 

If it is just to tax domestic corporations upon 
the full amount of their capital stock, notwith- 



Trusts and Monopolies. 337 

standing the fact that a considerable portion of its 
property and business may be located in other 
states, it is just to tax foreign corporations upon 
the full amount of their capital stock, although 
there may be only a small portion of their property 
or business within the actual jurisdiction of the 
state; and if it is unjust to tax foreign corpora- 
tions upon that portion of their stock which repre- 
sents the property which is not within the state, it 
is a much greater injustice to tax that portion of 
the stock of domestic corporations which repre- 
sents a legitimate extension of their business into 
other states. Whatever method of taxation is 
adopted, the states should cease to wage continual 
warfare upon their own corporations while allow- 
ing those of foreign creation to go practically un- 
molested, and whatever the provisions of their 
laws may be, none should be allowed to evade them 
by resorting to the expedient of assuming the nom- 
inal protection of some other state and thus becom- 
ing foreign corporations. 

As has already been stated, the power of a state 
to deal with foreign corporations is unquestioned, 
and absolute. They should, therefore, in the sober 
and judicious exercise of their powers, enact uni- 
form, just and consistent laws for the regulation 
of both foreign and domestic corporations, and 
cease to rely upon the laws of other states to regu- 
late a considerable portion of the business which is 
carried on within their jurisdiction, and to af- 
fect to believe that other states will do that which 
they know very well they will not do. They owe 
it to their own corporations which are trying to ob- 
serve their laws while obliged to compete with 



338 Combinations, 

those created in other states which are not subject 
to them ; they owe it to their own citizens who are 
doing business with these foreign corporations and 
who are liable to be injured by unjust methods in 
business, or to be oppressed by high and unreason- 
able prices or charges, and they owe it to their peo- 
ple whose money is invested in these stocks, and 
who are now obliged to depend entirely upon other 
states, and foreign laws to protect them from fraud 
and deception. 

Nearly all large corporations, and especially 
those which have resulted from the consolidation 
of smaller concerns, and those which are striving to 
secure a monopoly of their particular line of trade, 
have plants or branches of their business in many 
of the states, and if these would only, seriously, re- 
solve to lay a firm hand upon the branches w r hich 
lie within their jurisdiction, they could readily 
compel compliance with all reasonable regulations 
which they might wish to impose upon these cor- 
porations. If a number of the larger states would 
adopt a uniform and adequate system of laws for 
the regulation of foreign corporations, they could 
readily compel them to abandon many of the prac- 
tices which now make them so obnoxious to the 
people, in spite of the efforts of a few states to 
make capital out of the sale of licenses to foreign 
corporations for the undisguised purpose of en- 
abling them to defy the laws of other states. 

Having once seriously resolved to adopt practi- 
cal measures for the regulation of foreign corpora- 
tions, it would be a very simple matter to sub- 
ject them to state supervision, and to require them 
to submit to local regulations as to the maximum 



Trusts and Monopolies. 339 

profits to be earned by corporations; just as for- 
eign capitalists, who desire to loan out money, are 
now required to submit to the legal rates of in- 
terest established by the states in which they seek 
to transact business. 

We have spoken in another chapter of the direct 
relations which the protective tariff bears to the 
industrial trusts and combinations, and it will not 
be necessary to discuss the subject further here; 
but as we are now considering remedies, the impor- 
tance of the subject demands that we briefly state 
the considerations which lead us to class tariff re- 
vision as among the most important remedies that 
can be applied to the trust evil. We have already 
shown that the purpose of the protective tariff is 
to encourage the development of home industries, 
but that the imposition of high protective duties, 
by its exclusion of foreign competition, facilitates 
the formation of combinations among home pro- 
ducers, the purpose of which is rather to secure 
control of the industries which have already been 
established than to promote or extend them; that 
if these trusts and combinations are deriving a 
benefit from the protective tariff, they are wholly 
undeserving of it; that it was never intended for 
their protection and should be withdrawn from 
them ; that if they are not aided by this protection, 
then they must be selling as cheaply as the foreign 
producers could do without the tariff; that the 
independent producers must also sell at the same 
prices if they sell at all, and that the duty on 
these articles would therefore seem to be of no use 
to any one and should consequently be repealed. 
lAlso, that these trusts and combinations are sell- 



340 Combinations, 

ing large quantities of their products in competi- 
tion with foreign producers in foreign markets, 
and that they therefore seem to require no pro- 
tection from the government in order to enable 
them to carry on their business with profit; that 
experience affords us no reason to believe that do- 
mestic combinations will deal any more mercifully 
with their independent rivals than foreign competi- 
tors would, and since there is no means of affording 
the benefits of protection to individuals and deny- 
ing them to the trusts, and no means of securing 
them to individuals so that they cannot be deprived 
of them by the trusts, it is better to abandon protec- 
tion entirety in these cases. We therefore suggest 
that the tariff be removed from all articles which 
are produced or controlled by trusts or monopolies, 
and that the people be given the benefit of foreign 
competition in those lines of trade in which com- 
binations have practically stifled it at home. 

In view of what has already been said upon the 
subject of national legislation, we believe that this 
would prove to be the most practical and most ef- 
fective remedy that can be adopted by the Govern- 
ment of the United States for the prevention of 
monopolies, and for the suppression of the power 
and arrogance of these gigantic combinations of 
capital. A striking confirmation of the truth of 
this position is found in the recent almost univer- 
sal demand for the repeal of the tariff levied 
upon the importation of anthracite coal, 
both as a means of relieving the fuel famine 
which existed in consequence of the recent 
strike in the anthracite coal regions, and as a pre- 
cautionary measure to prevent the anthracite coaL 



Trusts and Monopolies. 341 

combination, which possesses complete control of 
the production of that product in this country, 
from extorting excessively high prices from the 
people in the future. 

Many other remedies directed against particular 
evils resulting from the operations of trusts and 
monopolies, have been proposed, such as, to pre- 
vent the watering of stock, discrimination in rates 
afforded to customers, over-charging, underselling 
of competitors in particular districts for the pur- 
pose of destroying competition, to require the mak- 
ing of reports, the keeping of certain books, etc., 
but these are for the most part matters of detail 
which should naturally grow out of the applica- 
tion of some well considered general principles 
such as we believe we have here indicated. 

Taxation is believed by many to be the proper 
means of curtailing the profits, suppressing the 
power, and discouraging the formation of trusts 
and combinations; but taxes, with one exception, 
must always, in the last analysis, be paid by the 
consumer, and the collection of them from the 
manufacturers of a given product is merely a con- 
venient way of collecting revenue from a slightly 
increased price of that product which the consumer 
is obliged to pay. 

Economists are pretty well agreed that there is 
one exception to this general rule, though some 
writers contend that even though the exception 
claimed may be theoretically correct, the value of 
the property which would be thus excluded would 
be so small as to render the amount of taxes which 
could not be shifted to the consumer, comparatively 
unimportant. The exception referred to, is that of 



342 Combinations, 

a tax upon property the supply of which is fixed 
by Nature and can neither be increased nor dimin- 
ished by human agencies. This form of property 
may be included in the general term land, and we 
are told that the burden of a tax levied upon land 
exclusive of the value given to it by labor or im- 
provements (sometimes termed Nature), must fall 
wholly upon the landlord and cannot be cast upon 
the tenant. The theory is, that the value of the 
land is determined by supply and demand as af- 
fected by its fertility, location, density of popula- 
tion, etc., but that as its quantity is fixed, the im- 
position of a tax can neither stimulate "nor dis- 
courage its production, nor affect the price by 
means of which it might be transferred to the 
tenant. In this discussion, however, we have 
merely been considering the products of human 
skill to all of which the general laws of taxation 
pertain ; and as a tax upon land has not been pro- 
posed as an important part of a remedy for the 
trust evils, except by those who would substitute 
a land tax in lieu of all others and thus revo- 
lutionize our whole system of taxation, (not deny- 
ing the necessity for reform in our revenue system, 
or questioning the good results which might fol- 
low from the collection of all taxes from land 
values if such a system could be brought into opera- 
tion within a reasonable length of time), it is not 
necessary for us to consider the economic effects of 
such a tax at this time. 

If no trust or combination has been formed and 
the taxes levied upon corporations are high in one 
state while they are low in others, the only effect 
of the tax will be to drive them from the state to 



Trusts and Monopolies. 343 

do business elsewhere; but if a combination has 
been formed, the tax will simply be added to the 
cost of production and the price of the articles 
produced will be raised accordingly; or if there 
is no combination, and the taxes levied by the va- 
rious states are uniform, they will be added to the 
price of the product, just as though an actual 
combination existed. Thus we see that taxation 
would not, in any material way, interfere with the 
operation of combinations, but that it would di- 
rectly tend to increase the burden of high prices, 
which is one of the very things that the people 
are striving to avoid. 

It is true that by the levying of such taxes a 
large amount of revenue might be raised for the 
government; but if, as we have just seen, these 
taxes must eventually be paid by the purchasing 
public, and that they would amount in reality to a 
direct tax upon the consumers for the collection of 
which the combination merely acts as the agent of 
the government, it would be far better to abandon 
this tax altogether, for we may rest assured that 
these combinations will always be careful to col- 
lect a sufficiently large amount from the public 
to pay them handsomely for their services as tax 
collectors. Moreover, even if these taxes were to 
be successful in appropriating to the community 
a considerable portion of the profits of some of 
these combinations, the benefits would wholly ac- 
crue to the state or municipality in which the com- 
bination happened to be located, and would be 
purely local; while the remainder of the country 
would still be obliged to pay tribute in the form 
of high prices. 

Some would have us rely upon education as a 



344 Combinations, 

cure for the trust evils, and this is perhaps the most 
general, as well as the most indefinite remedy 
which has yet been suggested. We need education 
it is true, but by it we mean the serious and im- 
mediate consideration of the conditions which con- 
front us, with a view to the practical application 
of the remedy to the affairs of to-day, not of to- 
morrow, and not the deliberate, scholarly investi- 
gation of the relation of the trusts to. the people as 
an abstract proposition, with a view to a thorough 
understanding of the subject by the next genera- 
tion. The action of the statesman is what the oc- 
casion requires rather than the deliberation of the 
scholar. 

The trusts and combinations are not wasting any 
time considering what their course shall be; they 
have plunged boldly into the field of action where 
they are growing more and more powerful every 
day, and the evils complained of are becoming cor- 
respondingly harder to remedy. It is always much 
more difficult to redress wrongs which have be- 
come established and intrenched behind vested in- 
terests than it is, by wise and judicious legislation, 
to prevent their growth in the first place. Any one 
can readily understand how much more arduous 
it would be to apply the remedies herein proposed 
to the giant corporations of to-day than it would 
have been to have imposed them upon the compara- 
tively small ones of forty or fifty years ago; and 
the longer we delay, the more perplexing it be« 
comes : hence the necessity for prompt and decisive 
action. 

It has been suggested by others that the wealth 
accumulated by these combinations and distributed 
among their stockholders as dividends, will in time 



Trusts and Monopolies. 345 

be reinvested in business in competition with the 
same or some other monopoly, and that prices will 
eventually be reduced so low as to make it unprof- 
itable for them to remain in the business ; but this 
does not seem to be entirely logical. If these com- 
binations have built up their power by underselling 
and driving independent producers out of the busi- 
ness, it does not seem reasonable to expect that 
new competitors, possessing no greater advantages,, 
will be any better able to successfully compete with 
them; and, if the mere reduction of the profits is 
to be relied upon to deter them from business, it 
would seem that the combination, possessing the 
greater amount of capital, could much better afford 
to continue the contest than its independent com- 
petitor. If, however, it should come to pass that 
the opposition should become so powerful as to 
possess more capital than the combination, the re- 
sult would in all probability, be merely a surrender 
of the one to the other, thus forming a new com- 
bination which would result in no benefit to the 
people. 

In connection with this prospective competition^ 
much is made of the advantages which small pro- 
ducers are said to possess over the very large ones, 
such as closer inspection, catering to local trade 
and conditions, etc., but the small producers have 
shown by their act of combining that they believe 
that greater advantages are to be secured by the 
use of greater capital. It is certainly possible to 
keep as close and accurate an inspection over the 
operations and affairs of a great combination as it 
was over those of the concerns which have entered 
into it, and since the interests involved are so 
much more imporant in the case of the combina- 



346 Combinations, 

tion, we would seem to be justified in presuming 
that the inspection maintained would be corre- 
spondingly greater. Every one in business is more 
or less familiar with the care which is taken by 
large corporations in the employment of their help, 
the references and securities required of them, the 
secret service which is employed to shadow those 
who are intrusted with responsible positions, tho 
many opportunities afforded in large concerns for 
comparing the work of one department or plant 
with that of another, and with all these facilities 
available for the use of combinations, we are forced 
to believe that the advantages of the small pro- 
ducers have been entirely over-estimated, and that 
they are greatly over-shadowed by the numerous 
economies which may be secured by combination. 
In summarizing the reports made by twenty- 
eight combinations to the Bureau of Labor in reply 
to questions submitted on this point, Professor 
Jenks says: "Most of the more ardent advocates 
of the competitive system are of the opinion that 
the pressure from competition is necessary in order 
to secure the most efficient work and the greatest 
care in saving waste. To the question as to whether 
there had been any loss of efficiency apparent in 
the combinations through carelessness brought 
about by the lack of competition and the certainty 
of profits, the answers were quite general. Twenty- 
one made the statement that no such loss of effi- 
ciency appeared, while seven others went so far as 
to assert positively that there had been a distinct 
increase in efficiency. The reason for this was 
stated to be the competitive cost system. It has 
been explained that the managers of the different 
plants working under the combination are each 



Trusts and Monopolies. 347 

compelled to keep careful records of the cost of 
production in his own plant, and that the various 
plants are then frequently compared one with the 
other as regards their efficiency in this particular. 
In this way, without there being any competition 
among the different plants so far as the marketing 
of the product is concerned, there is brought about 
a most vigorous competition among them in manu- 
facturing, a competition more searching in its 
nature than any that could come from entirely 
independent establishments, owing to the fact that 
the exact cost is known and the exact degrees of 
difference in efficiency can be measured. If one 
may judge from the reports furnished, this factor 
of loss of efficiency through certainty of profits has 
not appeared to any noteworthy extent in any of 
the large combinations reporting. The central 
office is able to keep accurate note of the efficiency 
of the different plants in most cases, inasmuch as 
frequent reports are required in eighteen cases 
daily, in other cases weekly or monthly ; and most 
of the combinations, in addition to these regular 
reports sent in from the different establishments 
themselves, are also in the habit of sending special 
inspectors to examine the work done in the different 
plants, and to make, in this way, personal reports, 
as well as personal suggestions, to the superintend- 
ents of the different establishments. 

It is also claimed that the overgrowth of trusts 
and combinations will eventually lead to their own 
disruption and dissolution, but we find nothing in 
the progress of the movement thus far to support 
this theory. Thus, the Distilling and Cattle Feed- 
ing Company of Illinois, organized in 1887, was 



348 Combinations, 

re-organized in 1895 as the still more powerful 
American Spirits Manufacturing Company which 
has since, in 1899, become amalgamated with the 
Distilling Company of America, forming the most 
complete and the most powerful combination of 
the various branches of that line of trade which has 
yet been attempted. Many other instances of simi- 
lar development might be cited. Of the one hun- 
dred eighty-five industrial combinations shown by 
the Twelfth Census as doing business during the 
year 1900, only six are reported to have failed, 
while we have before us a list of sixty-two which 
have been since organized and are now engaged in 
business, and twenty more of those shown in the 
census table have since combined with others, or 
have been absorbed by still greater combinations. 
Of the six reported to have suspended one had 
gone into the hands of a receiver in 1899, leaving 
only five failures during the last three years, or 
less than one per cent, per annum which is not 
more than the average for individuals or for ordi- 
nary corporations. 

In the failures which have already occurred we 
are unable to detect the germs of any disorder 
peculiar to combinations, or which we deem likely 
to develop into any fruitful cause of their general 
dissolution; and in view of the further fact that 
ten new combinations are being formed, for every 
one that has failed, we do not believe that it would 
be the part of wisdom to stand calmly by, waiting 
for their automatic dissolution to cure the ills of 
which the people complain. 

Competition of rival concerns has frequently 
been announced as the hope of many statesmen and 






Trusts and Monopolies. 349" 

writers on the subject, for the ultimate regulation 
of combinations and destruction of monopolies. 
And this is the remedy which, above all others, 
commends itself most readily for adoption by those 
who do not wish to enter seriously into the discus- 
sion of the relations which combinations bear to 
the people, and who prefer to trust to the future 
to produce remedies sufficient to meet all evils that 
may arise. Competition is the governor which, has 
always been relied upon in the past to regulate the 
conditions of trade, and to adjust the inequalities 
between the great and the small, but it has been 
entirely overriden in the recent rush to combina- 
tion, and thrown completely out of gear. 

If competition, which was so thoroughly estab- 
lished and maintained for so many years, has been 
so completely overborne and almost entirely swept 
away by the gigantic combinations of to-day, it is 
difficult to understand how new competitors who 
are placed at so much greater disadvantage can be 
expected to be more successful unless some sub- 
stantial assistance be afforded them. If these 
trusts and combinations, and the evils which have 
resulted from them, have grown up during the full 
strength and power and at the expense of the com- 
petitive system which was the pride of our age,, 
how can we reasonably expect them to be reformed j 
by this same competition which has been so badly 
crippled and undermined? 

In view of the enormous rate of increase in 1 
combinations to which we have before referred, it 
would seem that all substantial competition in 
many lines of trade must soon disappear if some- 
thing is not speedily done to prevent it. Competi-, 



2$o Combinations, 

lion and the fear of it, are wnolesome means of 
regulating trade, but it seems clear that if we are 
to secure their services, speedy and definite means 
must be adopted to encourage and preserve them. 
| It is believed that the insight into the ways and 
practices of these combinations which would be af- 
forded by state supervision of the affairs of cor- 
| porations, together with the consequent preven- 
tion of discriminating rates such as are now made 
by them in order to destroy competition in particu- 
lar localities, and which are received by them from 
transportation companies, etc., would clo more to 
foster competition than any other remedy that has 
yet been proposed. 

One of the most effective means yet adopted by 
trusts and combinations for the suppression of 
competition, is that of securing a monopoly of the 
sources of production of raw material. Without 
resorting to any more drastic measures, we believe 
that this evil can be remedied by a proper enforce- 
ment of a limitation upon the profits to be derived 
from that branch of their business. This would 
in the first place tend to restrict their desire to 
obtain control of the raw material, inasmuch as 
it could no longer be used as a means of oppressing 
or crippling their rivals, and in the next place, 
even though they have secured a monopoly of it, 
they may be compelled to supply it to competing 
concerns on the same terms at which it is fur- 
nished to their own mills, thus preserving the 
natural supply of raw material substantially ac- 
cessible to all and removing the most serious im- 
pediment to competition in the production of fin- 
ished products. 



Trusts and Monopolies. 351 

The power of the government to protect the 
people against injustice and oppression, to which 
we referred in the beginning of this chapter, in- 
cludes the power of the state to seize, to operate, 
and to control coal lands, mineral lands, timber 
lands, agricultural lands, railroads, or other prop- 
erties which may be necessary to supply the neces- 
sities of the public wherever and whenever the wel- 
fare of the people may require it. Existing laws 
may require that the people shall determine upon 
a price which they shall pay to the owner for the 
use of his property, but if the provisions of these 
laws conflict with the full exercise of their rights, 
the state always possesses the power to remove 
these obstructions: that is, no group of men shall 
be permitted to say we control the coal mines, but 
we refuse to mine coal even though the people 
perish for want of fuel ; or, we own the iron mines 
but will not operate them, though manufacture 
may be obliged to cease for want of iron; or, we 
command the copper mines, the gold mines, the 
silver mines, etc., but decline to work them, though 
trade may suffer thereby; we possess the timber 
lands but refuse to produce lumber, though the peo- 
ple demand it; we control a sufficient amount of 
the agricultural lands to make provisions scarce, 
but refuse to cultivate them though the inhabitants 
may starve for want of food ; or, we rule the rail- 
ways, but will not operate them though the com- 
merce of the nation may be stopped in consequence 
thereof. The power of government to regulate the 
public highways and navigable waters is univer- 
sally admitted, and this, upon the ground that the 
preservation of the rights of the public demands it 



352 Combinations, 

Why, then, should not the same reasons lead the 
government to assume control of these other prop- 
erties whenever an occasion may require it to do 
so? The right to command these natural sources 
of wealth and avenues of public service rests in 
the state by virtue of its sovereign power, and it 
may and must exercise it whenever it becomes 
necessary in order to protect the rights and well 
being of its people. 

The cry of paternalism is frequently raised for 
the purpose of frightening off any serious attempt 
at state regulation of the affairs of corporations; 
but every act of government partakes more or less 
of this character, since it is intrusted with the care 
and protection of the rights, liberties, property 
and lives of its people ; every measure adopted for 
the protection or encouragement of trade, science, 
literature or art, for the promotion of education, 
or for the care and support of the poor, the sick, 
and the afflicted, is met by this cry from one quar- 
ter or another; so the term has really lost all its 
odious significance in its application to govern- 
mental functions, and now merely implies that 
the proposed measure goes further than its oppo- 
nents (owing either to selfish motives or perhaps 
to real fears of excessive interference with private 
affairs) desire to see it go. It is merely a ques- 
tion of degree, not of kind. We should not, there- 
fore, be deterred by the charge of paternalism, but 
examine any proposed remedy or reform solely 
upon its merits, mindful only of its justice and the 
results it is designed to secure, remembering that 
governments are formed for the benefit of the 
whole people, and that whatever seems likely to 



Trusts and Monopolies. 353 

contribute to the general welfare, should receive 
our careful consideration and support, no matter 
by what name it may be called or how it may be 
characterized. 

The very act of creating a corporation and 
granting to it powers and privileges which are not 
enjoyed by individuals, is in a sense paternalism; 
yet it is not so termed by corporation promoters, 
and if it is not offensive paternalism to create cor- 
porations, why is it more obnoxious to impose such: 
regulations as are necessary to require them to 
conduct their affairs with due respect and regard 
for the rights of the public ? 

It is believed that after reviewing the various 
measures which have been proposed for the relief 
of evils growing out of the trust problem, a num- 
ber of which we have herein referred to, it will be 
found that most, if not all, of the evils sought 
to be cured by them, can more simply and effect- 
ively be prevented by a judicious application of the 
following three principles which we have already 
explained at some length: first, in the abolition of 
all special protection, favors or privileges which' 
are now afforded by the government to trusts 
or combinations or to the industries in which they 
may be engaged; second, state supervision and 
inspection of the accounts and affairs of all cor- 
porations; and third, the establishment by law of 
a maximum rate of profit which corporations shall 
he allowed to earn in business. 



THE END. 



DEC 5 



